Midas De Sdn Bhd v Rubicon Equities Sdn Bhd (WA-12BNCvC-154-12/2025)

WA-12BNCvC-154-12/2025 IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR IN THE FEDERAL TERRITORY KUALA LUMPUR (APPELLATE JURISDICTION) CIVIL APPEAL NO. WA-12BNCVC-154-12/2025 BETWEEN MIDAS DE SDN BHD (NO. Syarikat : 731917-H) ...APPELLANT AND RUBICON EQUITIES SDN BHD (No. Syarikat: 1021803-X) ...RESPONDENT [Appeal from the decision of the Sessions Court at Kuala Lumpur in Civil Suit No. WA-B52NCVC-34-01/2023 delivered on 10.12.2025] GROUNDS OF JUDGMENT A. Introduction

1. This is an appeal by the Plaintiff (now Appellant) against the decision of the learned Sessions Court Judge dated 10.12.2025, which dismissed the Plaintiff's claim and allowed the Defendant's (now Respondent's) counterclaim for outstanding rental, utilities, reinstatement costs, and double rental for holding over.

2. The appeal raises a central and determinative question of law: Whether a tenancy agreement for a commercial premises that had not been issued with a Certificate of Completion and Compliance ("CCC") at the time of execution is void for illegality under section 24(a) of the Contracts Act 1950.

3. The answer to this question requires careful consideration of the Street, Drainage and Building Act 1974 ("SDBA"), the Uniform Building By-Laws 1984 ("UBBL"), and the relevant jurisprudence including: i. Singma Sawmill Co Sdn Bhd v Asian Holdings (Industrialised Buildings) Sdn Bhd [1980] 1 MLJ 21; ii. Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ 151; iii. SSN Medical Products Sdn Bhd v Chin Hin Helmet Sdn Bhd [2021] 5 MLJ 906; iv. Merong Mahawangsa Sdn Bhd & Anor v Dato Shazryl Eskay bin Abdullah [2015] 5 MLJ 619; v. Beca (M) Sdn Bhd v Tan Choong Kuang & Anor [1986] 1 MLJ 390; vi. Liputan Simfoni Sdn Bhd v Pembangunan Orkid Desan Sdn Bhd [2019] 4 MLJ 141; vii. Detik Ria Snd Bhd v Prudential Corporation Holdings Ltd & Anor [2025] 3 MLJ 22.

4. The appeal also raises two ancillary issues: - whether the Appellant is barred by res judicata; and - whether the Appellant is precluded by affirmation, acquiescence, or unjust enrichment. B. Material Facts

5. The material facts are largely undisputed. On 26.6.2020, the parties executed a Tenancy Agreement for the Appellant to rent a portion of Lot 9175, Paramount Gardens, Petaling Jaya ("the Premises") for use as a developer's office and showroom, at a monthly rental of RM14,000.00 for the period 1.7.2020 to 31.12.2021. At the time of execution, the Premises did not have a CCC. This is admitted by both parties.

6. The Appellant took possession, renovated the Premises at a cost of RM622,156.84, and commenced operations. The Appellant obtained business licences from MBPJ for the period 24.8.2020 to 21.8.2021.

7. The CCC was eventually issued on 25.2.2022, long after the tenancy commenced and after the contractual term had substantially run. The Appellant paid RM233,181.14 in rent and utilities but withheld further payments, asserting that rent ought to be suspended pending resolution of licensing issues.

8. The Respondent levied distress, obtaining RM32,000.00. The Appellant's application to set aside the distress was dismissed without written grounds. The Appellant vacated the Premises on 17.11.2022.

9. The Sessions Court dismissed the Appellant's claim and allowed the Respondent's counterclaim, holding that: - the tenancy was valid despite absence of CCC; - the Appellant was liable for rent, utilities, reinstatement costs, and double rental; - the issue of illegality was res judicata. C. Issues For Determination

10. Three issues arise:

(1) Whether the Tenancy Agreement is void for illegality under section 24(a) of the Contracts Act 1950.

(2) Whether the Appellant is barred by res judicata.

(3) Whether the Appellant is precluded by affirmation, acquiescence, or unjust enrichment. D. ISSUE 1: WHETHER THE TENANCY IS VOID FOR ILLEGALITY D1. The Statutory Framework The relevant statutory provisions are clear and unequivocal.

11. The question is whether the act contracted for is forbidden by statute, not whether the statute prohibits the contract itself. In Sababumi's case (supra), the Federal Court held: "At common law, a contract may be illegal by common law or by statute, in either case the contract is unenforceable. It is to be borne in mind that s 24(a) of the Contracts Act 1950 involves the consideration and/or object of a contract being forbidden by law, and 'law' means common law or any statute. Thus, under s 24(a) aforesaid, an agreement is illegal and unenforceable when either the consideration or the object of the agreement is to do an act forbidden by law, and this, in my view, is the culled essence of some part of the common law on illegality of contract, which says in a nutshell that a contract to do an act illegal by statute or prohibited or forbidden by statute is unenforceable and illegal. It is very important to remember that it is distinguishable from another aspect or question as to whether a statute prohibits any contract. It is illegal and unenforceable under s 24(a) aforesaid because it is a contract involving consent of both contracting parties to do the very act prohibited or forbidden by statute. This position obtains as well when the terms of the contract amount inevitably to the same situation. Thus, an agreement to commit an offence as set out in the Penal Code is the simplest of examples of an agreement to do an act prohibited by statute. To decide if s 24(a) makes a contract illegal and unenforceable in connection with a statute, and this bears repeating, one must find out first if the statute prohibits or forbids the act which the parties have contracted to do by the contract in question, and not whether the statute prohibits the contract or the making of the contract in question by the parties. This difference is real, though very subtle. In my view, the failure to bear in mind this fine distinction has given rise to some difficulties."

12. This distinction is critical. If the act contracted for is prohibited, the contract is void. D3. Application to the Present Case

13. This distinction is critical. The law draws a sharp and immovable line between

(ii) a contract whose very performance requires the doing of an act that Parliament has expressly prohibited.

14. Only the former may survive; the latter is void. The authorities make clear that the inquiry under section 24(a) of the Contracts Act 1950 is not whether the statute prohibits the contract in abstract, but whether the act contracted for is itself forbidden by law.

15. This is the ratio of the Federal Court in Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ 151, which emphasises that where the consideration or object of an agreement necessarily entails the commission of a statutory offence, the agreement is rendered illegal and unenforceable.

16. In the present appeal, the act contracted for is the letting and occupation of the Premises. That act is not merely regulated; it is criminalised when undertaken without a Certificate of Completion and Compliance ("CCC").

17. Section 73(3) of the Street, Drainage and Building Act 1974 makes it an offence to "let or enter into an agreement to let an unauthorised building", while section 70(27)(f) criminalises the occupation or permitting of occupation of any building without a CCC.

18. By-Law 28(1) of the Uniform Building By-Laws 1984 reinforces this prohibition in mandatory terms. These provisions do not impose administrative conditions; they impose criminal sanctions. They do not regulate the manner of letting; they forbid the letting itself until statutory preconditions are met.

19. Thus, the illegality here is not collateral or incidental. It is direct, primary, and inseparable from the very performance of the tenancy. The parties could not perform the tenancy without committing the acts Parliament has expressly proscribed. In such circumstances, the contract is void ab initio.

20. As the Federal Court held in Singma Sawmill Co Sdn Bhd v Asian Holdings [1980] 1 MLJ 21, a tenancy of an illegal building cannot be validated by occupation, acquiescence, or commercial convenience. It was held in the said case, "the relationship of landlord and tenant can be created only by a contract, valid according to the law subsisting at the time of its execution or can be created or continued by operation of law". From the accounts of both the Plaintiff and Defendant, it cannot be disputed that on 26.6.2020 when the Tenancy was executed, the Premises were not certified to be fit for occupation. As such, the Premises is an illegal building (see SSN Medical Products Sdn Bhd v Chin Hin Helmet Sdn Bhd [2021] 5 MLJ 90628).

21. And as reaffirmed in SSN Medical Products Sdn Bhd v Chin Hin Helmet Sdn Bhd [2021] 5 MLJ 906, it was also held that the user principle does not apply in cases of illegal buildings. The Court of Appeal held that: "Premised on illegality, we agree with the submission of learned counsel for the appellant that the user principle based on cases of Othman bin Ali and Amm a/l Joy (suing as Chairman Committee Members of Wat Boonyaram) relied upon by the respondent do not apply in this case. In Othman bin Ali, the issue was trespass on the land. The case had nothing to do with an illegal structure. In accepting the respondent's submission on the user principle, the learned judge had also fallen into error as no issue of illegality was involved in those two cases. We concluded that His Lordship had erred in his findings by not considering the issue of illegality and by accepting the application of the user principle, which warranted appellate intervention (Gan Yook Chin (P) & Anor v Lee Ing Chin @ Lee Teck Seng & Ors [2005] 2 MLJ 1; [2004] 4 CLJ 309 (FC) at p 320)." Therefore, the fact that the Plaintiff used the Premises is irrelevant in law.

22. Central to this appeal is the question whether a landlord may lawfully rent out a building that has not been certified fit for occupation. This is not a peripheral or technical inquiry; it goes to the very legality of the transaction.

23. The statutory framework provides a clear and unequivocal answer. Section 73(1) of the Street, Drainage and Building Act 1974 ("SDBA") expressly criminalises the act of letting an unauthorised building. It provides that "any person who lets or enters into an agreement to let an unauthorized building for rent or any other consideration shall be guilty of an offence...". The prohibition is directed not at some collateral aspect of the tenancy, but at the very act of letting itself. It is therefore a direct statutory proscription.

24. This prohibition is reinforced by By-Law 28(1) of the Uniform Building By-Laws 1984 ("UBBL"), which mandates that "no person shall occupy or permit to be occupied any building... unless a certificate of fitness for occupation... has been issued", and further provides that non-compliance renders the person liable to prosecution.

25. Read together with section 70(27)(f) SDBA—which criminalises occupation without a Certificate of Completion and Compliance ("CCC")—the statutory scheme is unmistakable: a building without CCC is not to be let and is not to be occupied. These provisions are not administrative guidelines; they are penal prohibitions enacted to safeguard public safety and structural integrity.

26. To uphold such an agreement would not only contravene the express wording of the SDBA and UBBL, but would also defeat the legislative policy underlying these enactments. As the Federal Court held in Singma Sawmill Co Sdn Bhd v Asian Holdings (Industrialised Buildings) Sdn Bhd [1980] 1 MLJ 21, a tenancy of an illegal building is void ab initio, and rent is irrecoverable. The Court of Appeal in SSN Medical Products Sdn Bhd v Chin Hin Helmet Sdn Bhd [2021] 5 MLJ 906 reaffirmed that where the underlying structure is illegal, the "user principle" has no application; the law will not assist a party to recover benefits under an agreement that is itself prohibited.

27. Consequently, in law, the Tenancy Agreement is void and unenforceable. The consideration for the tenancy—namely, the right to rent and occupy the Premises—is not lawful within the meaning of sections 24(a) and (b) of the Contracts Act 1950. The parties contracted to do that which the statute forbids.

28. In short, the statutory prohibitions in the SDBA and UBBL strike at the heart of the tenancy. The agreement cannot be enforced without compelling the Court to sanction conduct that Parliament has expressly criminalised. The law does not permit such a result. The Tenancy Agreement is therefore void under section 24 of the Contracts Act 1950. D4. Respondent's Authorities Distinguished

29. The Respondent places considerable reliance on Beca (M) Sdn Bhd v Tan Choong Kuang, Liputan Simfoni Sdn Bhd v Pembangunan Orkid Desa Sdn Bhd, and Detik Ria Sdn Bhd v Prudential Corporation Holdings Ltd. These authorities, however, must be understood within their proper doctrinal context.

30. Each of these cases concerns situations where the impugned agreement intersected with revenue statutes, licensing requirements, or administrative non-compliance.

31. In Beca, the issue was the absence of a developer's licence at the time of entering a sale and purchase agreement.

32. In Liputan Simfoni, the question was whether non-payment of stamp duty rendered an agreement unenforceable.

33. Whereas, Detik Ria dealt with the proportionality of restitution under section 66 of the Contracts Act when an agreement is discovered to be void.

34. None of these cases involved a statutory regime that criminalises the very act contracted for unlike the case in our instant appeal. This distinction is not merely semantic; it is fundamental.

35. In the present appeal, the statutory provisions engaged—namely section 73(3) and section 70(27)(f) of the Street, Drainage and Building Act 1974 ("SDBA"), read with By-Law 28(1) of the Uniform Building By-Laws 1984 ("UBBL")—do not impose administrative conditions or licensing prerequisites.

36. They impose criminal prohibitions. Section 73(3) makes it an offence to let or enter into an agreement to let an unauthorised building. Section 70(27)(f) criminalises the occupation or permitting of occupation of a building without a Certificate of Completion and Compliance ("CCC"). By-Law 28(1) reinforces this prohibition in mandatory terms. These provisions are directed at public safety, structural integrity, and habitability—matters that Parliament has deemed sufficiently serious to warrant penal consequences.

37. The Respondent's authorities therefore operate in a different legal universe. They address situations where the statute regulates the manner in which a contract is to be performed, or imposes administrative or fiscal obligations, but does not prohibit the contract itself.

38. In such cases, the courts have rightly been slow to invalidate agreements unless the legislative intent to prohibit is clear. The law does not lightly strike down bargains freely made between parties. But where, as here, the statute expressly forbids the very act that forms the consideration and object of the agreement, the legal consequence is qualitatively different. The distinction is akin to the difference between a traveller who strays from the marked path and one who attempts to walk through a gate that Parliament has deliberately locked.

39. The former may be corrected; the latter cannot be permitted to proceed. Section 73(3) of the Street, Drainage and Building Act 1974 and By-Law 28(1) of the Uniform Building By-Laws 1984 do not merely regulate the manner in which a tenancy is to be performed—they bar the doorway entirely until the statutory preconditions for safety and habitability are satisfied.

40. Where the statute closes the gate, the courts cannot open it by judicial discretion. The agreement is void because its performance necessarily requires the commission of acts that Parliament has expressly prohibited.

41. The SDBA and UBBL provisions are not regulatory hurdles that may be regularised or waived. They are penal prohibitions enacted to ensure that no person is exposed to the risks associated with occupying or operating from a building that has not been certified safe. To treat these provisions as mere administrative requirements would be to dilute their protective purpose and undermine the legislative scheme.

42. As the Federal Court emphasised in Sababumi, the correct inquiry under section 24(a) of the Contracts Act is whether the act contracted for is forbidden by law. Here, the act of letting and occupying the Premises without CCC is expressly criminalised.

43. Accordingly, the Respondent's reliance on Beca, Liputan Simfoni, and Detik Ria is misplaced. These authorities do not apply to a statutory regime that criminalises the very performance of the agreement. The present case falls squarely within the line of authorities such as Singma Sawmill and SSN Medical Products, where the courts have held that agreements involving illegal buildings are void ab initio.

44. The Respondent's authorities cannot displace the clear statutory prohibitions in the SDBA and UBBL, nor can they validate a tenancy that Parliament has expressly forbidden. D5. Conclusion on Illegality

45. Having considered the statutory framework, the authorities, and the undisputed factual matrix, I am satisfied that the legal consequences flow with clarity.

46. First, the Tenancy Agreement was concluded at a time when the Premises were an unauthorised building within the meaning of the Street, Drainage and Building Act 1974. Its execution therefore contravened section 73(3), which criminalises the act of letting such a building.

47. Second, the Appellant's occupation of the Premises—an occupation contemplated and required by the tenancy—was itself prohibited by section 70(27)(f) of the same Act and By-Law 28(1) of the Uniform Building By-Laws 1984.

48. Third, because the very consideration for the tenancy involved acts that Parliament has expressly forbidden, the consideration was unlawful within the meaning of section 24(a) of the Contracts Act 1950. The agreement, resting on an unlawful foundation, cannot stand. It is void. A void agreement, by operation of section 2(g) of the Contracts Act, is not merely unenforceable—it is treated as though it never existed in law. No rights may be derived from it, and no obligations may be imposed under it. The law cannot lend its authority to enforce a bargain whose performance necessarily entails the commission of statutory offences. E. ISSUE 2: RES JUDICATA

49. The Respondent contends that the issue of illegality had already been raised by the Appellant in the earlier distress setting-aside proceedings, and that the dismissal of that application renders the present challenge barred by res judicata.

50. This submission requires careful scrutiny, for the doctrine of res judicata—while essential to finality in litigation—cannot be applied mechanically or in a manner that defeats substantive justice.

51. The governing principle is well settled. For issue estoppel to arise, the earlier decision must have necessarily and with precision determined the very issue sought to be re-litigated.

52. This requirement, articulated in Tong Lee Hwa & Anor v Lee Yoke San [1979] 1 MLJ 24 and reaffirmed in Residence Hotels & Resorts Sdn Bhd v Seri Pacific Corp Sdn Bhd [2016] 2 MLJ 640, ensures that the doctrine is applied only where the court can be certain that the point was squarely raised, fully argued, and decisively resolved. It is not enough that the issue was mentioned; it must have been the ratio decidendi of the earlier decision.

53. In the present case, the record of the distress proceedings reveals several difficulties that prevent the Respondent from satisfying this stringent test: - No written grounds were issued by the learned Sessions Court Judge in the distress matter, despite a request for reasons. - The Respondent had raised a preliminary objection that the Appellant's application was procedurally defective and ought to have been filed in the execution file. - The dismissal of the application was unreasoned, and the basis of the decision remains unknown.

54. In these circumstances, it is impossible for this Court to conclude that the issue of illegality was "necessarily and with precision" determined. The dismissal may well have been grounded on the procedural objection rather than on the merits of the illegality argument. The absence of written reasons creates an evidential vacuum that the Respondent cannot fill by inference or assumption. The burden lies on the party asserting estoppel, and that burden has not been discharged.

55. Moreover, even if the issue had been touched upon in the earlier proceedings, the doctrine of res judicata cannot be invoked to shield an agreement that is void for illegality. The Federal Court in Merong Mahawangsa Sdn Bhd v Dato' Shazryl Eskay Abdullah [2015] 5 MLJ 619 made it clear that courts are duty-bound to take notice of illegality at any stage, whether or not pleaded, and irrespective of whether the parties themselves raise it. Illegality is a matter of public policy, and public policy cannot be estopped. A court cannot be compelled to enforce an agreement that the law declares unlawful merely because an earlier court did not expressly pronounce upon the issue.

56. It was held in Merong Mahawangsa (supra), "Clearly, therefore, courts are bound at all stages to take notice of illegality, whether ex facie or which later appears, even though not pleaded, and to refuse to enforce the contract. In that regard, we endorse the following statement of law by the Court of Appeal per Hamid Sultan JCA, delivering the judgment of the court, in China Road & Bridge Corp & Anor v DCX Technologies Sdn Bhd and another appeal [2014] 5 MLJ 1: At the outset we must say that the trial courts must be vigilant not to provide any relief on contracts which is void on the grounds of public policy, or illegality ... whether or not it is the pleaded case of the parties or whether the issue was raised during the trial. The case of Blay v Pollard & Morris [1930] 1 KB 628 where Scrutton LJ observed: Cases must be decided on the issues on the record; and if it is desired to raise other issues they must be placed on the record by amendment. which has been followed in a number of local cases will not stand to tie the hands of judges to deal with the above issues, or arrest impropriety on its own motion at limine".

57. Accordingly, the doctrine of res judicata has no application here. The earlier dismissal of the distress setting-aside application does not preclude the Appellant from raising the issue of illegality in these proceedings, nor does it prevent this Court from examining the legality of the tenancy afresh. The Respondent's objection must therefore fail. F. ISSUE 3: AFFIRMATION, ACQUIESCENCE & UNJUST ENRICHMENT

58. The Respondent further submits that, even if illegality were established, the Appellant should nevertheless be precluded from relying on it because the Appellant had occupied the Premises, carried out renovations, obtained business licences, and derived commercial benefit from the tenancy. According to the Respondent, these acts amount to affirmation, acquiescence, and unjust enrichment.

59. With respect, this submission cannot be sustained. The law has long recognised that where a contract is tainted by statutory illegality, doctrines founded on conduct—such as affirmation, waiver, or acquiescence—cannot be invoked to breathe life into an agreement that Parliament has rendered unlawful. Three considerations are decisive.

(1) Illegality cannot be affirmed

60. A contract prohibited by statute is void ab initio. It is not voidable at the election of the parties, nor is it capable of being validated by subsequent conduct. The Federal Court in Merong Mahawangsa (supra) emphasised that courts must take notice of illegality whenever it appears, even if not pleaded, because illegality engages public policy rather than private rights.

61. Where the statute criminalises the very act contracted for—as is the case under sections 73(3) and 70(27)(f) of the SDBA and By-Law 28(1) of the UBBL—no amount of occupation, payment, or commercial activity can convert an unlawful tenancy into a lawful one. The law does not permit parties to "affirm" an offence.

(2) The user principle does not apply to illegal buildings

62. The Respondent's reliance on the Appellant's use of the Premises is misplaced. The Court of Appeal in SSN Medical Products Sdn Bhd v Chin Hin Helmet Sdn Bhd (supra) held unequivocally that the user principle—under which a party may be required to pay for the benefit of occupation—has no application where the underlying structure is illegal. The rationale is straightforward: the law cannot impose a payment obligation arising from an occupation that the statute itself prohibits.

63. To do so would amount to enforcing indirectly what the statute forbids directly and would erode the protective purpose of the SDBA and UBBL. The law cannot permit a party to claim shelter under the very roof that Parliament has declared unsafe. The Appellant's use of the Premises, therefore, cannot operate as a bar to raising illegality.

(3) Section 66 of the Contracts Act governs restitution

64. Once an agreement is found to be void, the consequences are governed by section 66 of the Contracts Act 1950, which requires each party to restore the advantage received under the void agreement. The statutory remedy is restitutionary, not punitive.

65. It does not depend on notions of fairness, enrichment, or fault; it flows automatically from the legal character of the agreement. The Respondent's attempt to invoke unjust enrichment is therefore unnecessary and legally irrelevant. The statute itself prescribes the remedy.

66. Accordingly, the Appellant is entitled to recover the monies paid under the void tenancy, and the Respondent cannot rely on the Appellant's occupation or commercial use of the Premises to resist restitution. The law does not allow a party to retain benefits obtained under an agreement that the statute declares unlawful. G. Remedy

67. Once the tenancy is found to be void for illegality, the legal consequences follow not from notions of fairness or enrichment, but from the statutory command of section 66 of the Contracts Act 1950. That provision imposes a mandatory obligation of restitution whenever an agreement is discovered to be void.

68. It requires each party to restore the advantage received, thereby returning the parties, as far as possible, to the position they occupied before the unlawful transaction was undertaken. In the present case, the evidence shows that the Appellant paid a total of RM233,181.14 under the purported tenancy, and a further RM32,000.00 was obtained from the Appellant through distress proceedings.

69. These sums were paid pursuant to an agreement that the law does not recognise. They therefore constitute advantages received by the Respondent within the meaning of section 66.

70. Accordingly, these amounts must be refunded. Restitution is not discretionary; it is the statutory consequence of the tenancy being void ab initio. To permit the Respondent to retain these sums would be to allow a party to profit from an agreement whose performance is criminalised by the SDBA and UBBL, a result the law cannot countenance.

71. It follows that the Respondent's counterclaim, being entirely premised on the enforceability of the tenancy, cannot stand. A void agreement cannot give rise to rights, obligations, or remedies. The counterclaim must therefore be dismissed in its entirety. H. Conclusion

72. This case illustrates the importance of statutory safeguards governing building safety. The CCC regime is not a mere administrative formality; it is a public safety mechanism. Parties cannot contract out of statutory prohibitions, nor can commercial convenience override legislative intent. Where Parliament has spoken in clear terms, the courts must give effect to that command. For the reasons above, I allow the appeal. I. Orders

73. The orders of the Sessions Court dated 10.12.2025 are set aside. Judgment is entered for the Appellant as follows: