Myvilla Development Sdn Bhd v Ong Chee Poh (BA-22NCvC-555-12/2019)

The Plaintiff’s claim arises from the sale of a property which it developed and sold to the Defendant pursuant to a Sale and Purchase Agreement dated 31.5.2011. Apart from paying the initial 10% deposit for the property, the Defendant did not pay the balance purchase price but obtained vacant possession to the property. Upon discovery of this fact, the Plaintiff terminated the SPA on 15.10.2019. 01/11/2022 16:31:28 BA-22NCvC-555-12/2019 Kand. 66 Salient facts

The facts upon which the suit is premised, is largely undisputed. They are as follows.

The Plaintiff is a developer of a housing development known as Garden Residence. On 31.5.2011, the parties entered into a agreement (“SPA”) for the sale and purchase of a property identified as P3-3SD028, Type D-Intermediate, Garden Residence held under Master Title 262118, Lot No. 45619, Mukim Dengkil, Daerah Sepang, Negeri Selangor (“the said property”). The said property had an address at No. 29, Jalan GR 3/1, Jacaranda, Garden Residensi, Cyber 3, 63000 Cyberjaya, Selangor Darul Ehsan. The purchase price of the property was RM 1,398,800.00.

A deposit of 10% amounting to RM 139,880.00 was paid by the Defendant on 31.5.2011. The Defendant had earlier applied for financing from Hong Leong Islamic Bank Berhad to finance the purchase of the said property. The loan application was approved on 20.12.2010.

On 20.12.2012, the Plaintiff informed the Defendant that it was in a position to deliver vacant possession of the said property.

On 19.6.2013, the keys to the said property was handed over to the Defendant. The Plaintiff discovered that full payment of the purchase price had not been made much later on 13.9.2019 when an internal audit of the company’s records was undertaken.

The Plaintiff then instructed its solicitors, Messrs. Ricky Tan & Co. to issue a letter of demand dated 30.9.2019 for the payment of the balance purchase price together with interest within 14 days. The Defendant was also informed that in the event of his failure to do so, the Plaintiff would exercise its right under the SPA to terminate the agreement.

No response was forthcoming from the Defendant to the Plaintiff solicitor’s letter of demand. On 15.10.2019, the Plaintiff issued a Notice of Termination of the SPA. A demand was also made for RM 1,106,719.08 being the total outstanding as a result of the termination. Plaintiff’s case

The Plaintiff alleged fraud against the Defendant. Particulars of fraud were set out in its Statement of Claim. The Plaintiff claims that Defendant had obtained vacant possession of the said property in the full knowledge that the balance purchase price had yet to be paid. The Defendant knew that at all material times, he had only paid 10% of the purchase price.

Although the loan application was initially approved, it was subsequently cancelled by the bank on 14.8.2015.

The provisions of the SPA stipulate the conditions upon which vacant possession can be delivered, which include payment of the balance purchase price. The Defendant failed to fulfill the said conditions.

The relief the Plaintiff seeks is couched in the alternative. The Plaintiff claims the amount of RM 2,143,728.06 which comprises the balance purchase price and interest of 10% calculated from 2.7.2011 until 10.9.2019. In the alternative, the Plaintiff seeks a declaration the SPA had been validly terminated and an order for the Defendant to deliver vacant possession of the said property. Defence case

The pleaded case for the defence is this. As Messrs. Halim Hong & Quek were the solicitors for the SPA appointed by the Plaintiff, the Defendant appointed the same firm to handle the application for financing from Hong Leong Islamic Bank Berhad for him. He contends that as he had applied for financing from the said bank, the balance purchase price ought to have been claimed directly from the said bank by the Plaintiff.

The Defendant denied fraud on his part. On the other hand, the Plaintiff by its numerous correspondence had represented that he was allowed to take vacant possession and there were no payments outstanding from him. Reliance was placed upon the Plaintiff’s letter of 20.12.2012, informing him that it was ready to deliver vacant possession. In addition, on 29.9.2014, he was informed by the Plaintiff that strata title for the said property had been issued, and that there were no payments due from him to the Plaintiff.

In any event, the Defendant claims that the Plaintiff’s action in these proceedings is time-barred. As the Plaintiff’s suit is premised on the breach of the SPA, section 6(1) of the Limitation Act 1953 stipulates that an action founded on contract must not be brought after the expiry of six years from the date the cause of action accrued.

The first instalment was due on 1.7.2011, twenty-eight days after billing of the progress payment. As the Plaintiff’s suit is premised on the Defendant’s failure to pay, the SPA was breached on 2.7.2011. The time for bringing of this suit is six years from 2.7.2011. The present suit filed on 5.12.2019 was clearly statute-barred.

Further, he contends that the attempt of the Plaintiff to allege fraud is but a mere afterthought to circumvent the limitation issue. The Defendant’s counterclaim

The Defendant contends that as a consequence of the actions of the Plaintiff informing him to take delivery of vacant possession and representing that no amount was due from him, he is entitled to the said property. He seeks an order that the Plaintiff do all that is necessary for a strata title to the said property be issued to him. Analysis and decision of this court

At the outset, I make this observation. The Plaintiff’s claim, from the reliefs sought, is founded on breach of contract. It is not disputed that the Defendant failed to pay the balance purchase price. However, the Plaintiff alleged fraud on the part of the Defendant that without paying the balance purchase price, he took vacant possession of the said property.

Two critical issues arise for determination of this court. The first is whether fraud is proved in which case, the Plaintiff’s claim for breach of the SPA would not be defeated by limitation as the discovery of the fraud was only in September 2019. This suit was filed in December 2019.

In the event fraud is proved, this court is to then determine if the Plaintiff is entitled to its monetary claim for RM 2,143,728.06 or only to its alternative claim for a declaration that the SPA has been validly terminated. Consequently, upon termination, the Plaintiff would be entitled to an order for possession of the said property.

It is trite law that the Plaintiff bears the onus of proving its claim and the Defendant, his counterclaim. (See: sections 101 and 102 of the Evidence Act, 1950 and Letchumanan Chettiar Alagapan (as executor to SL Alamelooo Achi (Deceased) & Anor v Secure Plantation Sdn. Bhd.) [2017] 5 CLJ 418). Fraud and limitation

As a starting point, I will set out the basic principles in relation to fraud. The standard of proof for fraud in a civil case has been settled by the Federal Court in Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1. The Plaintiff here is to prove its allegation of fraud on a balance of probabilities.

Next, the issue of fraud here arises in the context of the defence of limitation. Section 29 of the Limitation Act provides an exception to the period of limitation in the case of fraud. The provision reads,

Where, in the case of any action for which a period of limitation is prescribed by this Act, either-

the action is based upon the fraud of the defendant or his agent or of any person through whom he claims or his agent; or

the right of action is concealed by the fraud of any such person as aforesaid; or

the action is for relief from the consequences of a mistake, the period of limitation shall not begin to run until the plaintiff has discovered the fraud or the mistake, as the case may be, or could with reasonable diligence have discovered it: Provided that nothing in this section shall enable any action to be brought to recover, or enforce any charge against, or set aside any transaction affecting, any property which-

in the case of fraud, has been purchased for valuable consideration by a person who was not a party to the fraud and did not at the time of the purchase know or have reason to believe that any fraud had been committed; or

(ii) in the case of mistake, has been purchased for valuable consideration, subsequently to the transaction in which the mistake was made, by a person who did not know or have reason to believe that the mistake had been made.

In Credit Corporation (M) Bhd v Fong Tak Sin [1991] 1 MLJ 409, the Supreme Court held, This provision was inserted to protect a plaintiff who was ignorant of his right of action in the special case of fraudulent concealment, and to overcome the difficulty that time would otherwise be running against him, unknown to him.

Reference is also made to Tenaga Nasional Bhd v Kesang Trading Sdn Bhd & Ors [2002] 6 MLJ 1, the relevant portion of the judgment which reads, Halsbury's Laws of England (4th Ed) at p 413 states: Fraudulent concealment has been defined in relation to an action to recover property, as designed fraud by which a person, knowing to whom the right belongs, conceals the circumstances giving the right, and by means of that concealment enables himself or some other person to enter and hold property. It is not necessary, in order to constitute fraudulent concealment of a right of action, that there should be active concealment of the right of action after it has arisen; the fraudulent concealment may arise from the manner in which the act gives rise to the right of action is performed. 'Fraud' does not necessarily imply moral turpitude; it is enough if the conduct of the defendant or his agent is so unconscionable that it would be inequitable to allow him to rely on the limitation period. A very liberal interpretation was given to the term 'fraud' in s 26(b) of the English Limitation Act 1939 by the English courts. This section is in pari materia with s 29(b) of the Act. Associate Professor Chong Yeow Choy in Law of Limitation, Butterworths Asia 1995 at p 113 pointed out that 'a plaintiff who is unable to bring his case within s 29(a) will still succeed in defeating the defence of limitation by bringing the case within s 29(b)'. The learned author referred to the case of Beaman v ARTS Ltd [1949] 1 All ER 465 where the Court of Appeal held that the case did not fall within the ambit of s 26(a) of the 1939 Act, it was nevertheless willing to accept that the plaintiff's right of action had been fraudulently concealed within s 26(b).

Finally, the Supreme Court in Lim Yoke Kong v Sivapiran A/L Sabapathy [1992] 2 MLJ 571 held, In dealing with the meaning of the word 'fraud' in s 29(b) of the Act, the learned judge referred to English decisions for the simple reason that s 26 of the UK Limitation Act 1939 is in pari materia with our s 29. In Kitchen v Royal Air Forces Association & Ors 2, the learned judge quoted the following passage from the judgment of Lord Evershed MR: It is now clear, however, that the word 'fraud' in s 26(b) of the Limitation Act 1939, is by no means limited to common law fraud or deceit. Equally, it is clear, having regard to the decision in Beaman v ARTS Ltd [1949] 1 All ER 465, that no degree of moral turpitude is necessary to establish fraud within the section. What is covered by equitable fraud is a matter which Lord Hardwicke did not attempt to define two hundred years ago, and I certainly shall not attempt to do so now, but it is, I think, clear that the phrase covers conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other.

In the present case, the Defendant candidly admitted that he was aware at the time of taking vacant possession that he had not made any instalment payments to the bank. In cross-examination he said, “Saya tahu saya tidak bayar apa-apa kepada bank semasa saya ambil vacant possession.” He further admitted that apart from the 10% deposit, he made no other payments. He was also aware that the purchase price was to be made according to the schedule of progressive payments. He was forthright even to acknowledge that he was responsible to pay the full purchase price. He was far from an ignorant purchaser who did not know his obligations under the SPA.

Therefore, when he received the letter of 20.12.2012 to collect the keys and took delivery of the keys on 19.6.2013, some two years after execution of the SPA, he must be taken to have been aware that he was not entitled to do so as he had not fully paid the balance purchase price. No reasonable purchaser would have thought he could collect the keys to the premises when full payment had not been made.

There was no evidence that he made the necessary enquiries to ascertain if the records of the Plaintiff were correct. Instead he chose to rely on the contents of the Plaintiff’s letter stating that vacant possession of the said property will be delivered only if there are no amounts outstanding.

I consider it outrageous on the part of the Defendant to take advantage of the situation and the Plaintiff’s mistake in handing over the keys of the said property to him. It was brazen of him to think he was entitled to the said premises. He chose to keep silent in the face of Plaintiff’s mistake.

The Defendant had also applied for financing of RM 1,258,920.00 which was approved by a letter of offer dated 20.12.2010 from Hong Leong Islamic Bank Berhad. He then contends that the balance purchase price was to be claimed by the Plaintiff from Hong Leong Islamic Bank Berhad. The position is inexplicable as it is tantamount to disclaiming his obligation to enquire if the loan had been fully disbursed to the Plaintiff.

In any event, the letter of offer expressly stated that as a condition for the release of the facilities, “The Financing Document and all other security documents relating to the Facilities have been duly executed and/or stamped and/or registered with the relevant authorities to the satisfaction of the Bank and subject to the Bank’s solicitor’s confirmation that it is in order to release the Facilities and the Bank’s interest is protected at all times.” There were no executed loan agreement nor charge documents tendered in evidence. This would have put the Defendant to notice that the balance purchase price had not been paid at the time he took the keys.

By taking this position, the Defendant is in effect saying it was not his business to ascertain if the purchase price had been fully paid when he took the keys. The responsibility was that of the Plaintiff’s, and if he was handed vacant possession of the said property, he had every right to take it.

It is patently obvious that the financing facilities were not disbursed. This fact was confirmed subsequently by Messrs. Halim Hong & Quek vide their letter of 23.1.2020 to the Plaintiff stating that the financing facility was cancelled on 14.8.2015.

Although the Defendant denied being informed by the said bank of the cancellation on 14.8.2015, this does not negate his responsibility to ensure the purchase price had been disbursed at the time he took delivery of vacant possession. I doubt the genuineness of his alleged ignorance.

He further relied on the letter dated 29.9.2014 sent by the Plaintiff informing him that strata title for the said property had been issued by the local authorities. The letter states that based on the record of the Plaintiff, no amounts were outstanding from the Defendant.

The Plaintiff’s witness, the general manager of the credit administration department, explained that no amount was stated in the said letter as the amount could not be ascertained at the time of issuing the letter. The amount is to be confirmed subsequently by the developer at the time of signing the Memorandum of Transfer for the issuance of strata title to the Defendant. Therefore the fact that no amount was mentioned in the letter is not to be construed as no amount due from the Defendant.

I accept the explanation given by the Plaintiff’s witness.

Upon considering the totality of the evidence in relation to the circumstances surrounding the delivery of vacant possession as aforementioned, I am satisfied there was concealment on the part of the Defendant. I have no doubt that he knew the balance purchase price had not been fully paid at the time he took possession of the keys. He did not disclose this fact until it was discovered through an internal audit conducted on 13.9.2019. A police report was made thereafter. Having the filed the instant suit on 5.12.2019, the Plaintiff was therefore well within time.

Bearing in mind the authorities referred to on fraud, I find this concealment constitutes fraud within the meaning of section 29(b) of the Limitation Act 1953. Had the Defendant not concealed the fact of non-payment, I have no doubt the Plaintiff would have pursued its rights under the SPA within the limitation period. In the circumstances, it would be most unconscionable for the Plaintiff’s case to be defeated by limitation.

I therefore find the Defendant’s case that the suit of the Plaintiff is time-barred to be wholly without merit. The relief to be allowed

At the trial, I ascertained from the Plaintiff’s counsel the relief sought as there were alternative reliefs in its pleading. Counsel confirmed that the Plaintiff seeks the sum of RM 2,143,728.06 which comprises of the balance purchase price and the interest computed from 2.7.2011 until 10.9.2019. This interest is calculated on the progress payment which the Defendant ought to have paid according to the SPA.

The Plaintiff had however exercised its rights under the SPA to terminate the SPA by their letter of 15.10.2019. Having elected to do so, the Plaintiff cannot now take the position that they wish to affirm the contract and sue for the balance purchase price. Clause 10 of the SPA allows the Plaintiff to determine the SPA in the event of a default on the Defendant’s part to pay the sums due under the agreement. The Plaintiff is also allowed to forfeit 10% of the purchase price paid. Defendant’s counterclaim

The Defendant’s claim to be entitled to the property notwithstanding only 10% of the purchase price had been paid is most inequitable and unconscionable. In any event, his counterclaim fails as the Plaintiff had terminated the SPA.

Premised on the above reasons, the Plaintiff’s claim is allowed as follows:-

a declaration that the SPA entered into between the Plaintiff and the Defendant in respect of the said property had been validly terminated;

the Plaintiff is allowed to take vacant possession of the said property at the expiry of seven days after the posting of the sealed order of this court on the said property;

the Plaintiff is allowed to use all reasonable force to recover vacant possession of the said property;

the deposit of RM 139,880.00 being 10% of the purchase price of the said property paid by the Defendant is hereby forfeited; and

the Plaintiff is allowed to dispose of any items found in the said property after the expiry of the period in (a) above and the Plaintiff is allowed to recover from the Defendant all costs in disposing of the items.

The Defendant’s counterclaim is dismissed. As the trial was completed in only a day, and the issues in this case are not complex, I order the Defendant to pay costs of RM 7,000 to the Plaintiff. Dated : 31st day of October 2022 -sgd- ………………..….... Alice Loke Yee Ching Judicial Commissioner High Court of Malaya at Shah Alam Counsel for Plaintiff : Ms. Mah Mun Yan (Mr. Marcus Tan with her) Tetuan Ricky Tan & Co Counsel for Defendants : Mr. R Thayalan Retanavalu (Ms. Ambbi Balakrishnan with him)