22.7.2023. The Applicant’s solicitors had on 22.7.2023 asked both parties to sign the Agreements in escrow pending exchange, which the Respondent did not object to. The Applicant had duly signed the Agreements and made arrangements to pay the balance deposit, evincing its willingness and readiness to complete the contract. [48] I do not think the “Subject to Contract” marking in the Letter of Offer negates the existence of a concluded contract in light of the clear acts of part performance. It is well established that a binding contract can still arise even where the phrase “Subject to Contract” is used, if the subsequent conduct of the parties show an intention to be bound. This was made clear by Edgar Joseph Jr SCJ in Ayer Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprises Sdn Bhd [1994] 3 CLJ 133: “True it is that merely because the parties contemplate the preparation of a formal contract that by itself will not prevent a binding contract from coming into existence before the formal contract is signed. It is not difficult to cite an anthology of cases for this proposition but we need no more than refer to Von Hatz Feldt-Wildenburg v. Alexander [1912] 1 Ch 284, (at pp. 288, 289) where the Court said this: It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplates the execution of a further contract between the parties it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case, there is no enforceable contract because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case, there is a binding contract and reference to the more formal document may be ignored.” [49] I am of the view that on a proper construction, the “Subject to Contract” marking in the Letter of Offer is a mere expression of the desire of the parties to formalise the agreed terms in the Agreements, and not a condition precedent to the formation of a binding contract. The terms of the Letter of Offer are sufficiently certain and complete to constitute a valid contract to sell the Property, with the execution of a formal agreement being the manner in which the transaction already agreed will be carried out. The subsequent email correspondence between the parties’ solicitors from 22.7.2023 onwards clearly indicate that all terms had been finalised pending execution of the Agreements in escrow. The Respondent’s eleventh hour notice on 31.7.2023 that it no longer wished to proceed with the transaction because it did not align with its business plan does not change the fact that a binding contract had already been reached. [50] Therefore, I find that there was a concluded contract between the Applicant and the Respondent for the sale and purchase of the Property and lease back of the Property, and the Respondent had breached the contract by failing to sign the Agreements. The Applicant is entitled to specific performance of the contract as it has shown its continuous willingness and readiness to perform its obligations thereunder. “Subject to Contract” clause [51] The Respondent contended that the Letter of Offer did not constitute a binding contract but was merely an agreement to further negotiate as it contained the words “Subject to Contract”. The Respondent argued that this meant that parties were still negotiating and did not intend to be bound until a formal agreement was executed. The Respondent relied on the cases of Ayer Hitam Tin Dredging Malaysia Berhad v YC Chin Enterprise [supra], Low Kar Yit & Ors v Mohamed Isa & Anor [1963] MLJ 165 (HC), Kam Mah Theatre Sdn Bhd v Tan Lay Soon [1994] 1 MLJ 108 (SC) and Kheamhuat Holdings Sdn Bhd v The Indian Association, Penang [2006] 4 MLJ 656 (CA) to submit that where the words “Subject to Contract” are used, there is no enforceable contract until the execution of a formal agreement. [52] The Applicant submitted that notwithstanding the words “Subject to Contract”, a binding contract had been reached between the parties as evinced by their subsequent conduct in performing the conditions of sale and finalising the terms of the Agreements. The Applicant relied on case law establishing that the court can infer a binding contract from the acts of part performance and exchanges between the parties where it is clear that a complete agreement had been reached. The Applicant contended that the words “Subject to Contract” should be construed as a mere expression of the desire of the parties to record the agreed terms in a formal document and not a condition precedent to contract formation. [53] On a thorough consideration of the evidence and the law, I am of the view that the Letter of Offer duly accepted by the Respondent on 23.3.2023 does constitute a binding contract for the sale and purchase of the Property notwithstanding the “Subject to Contract” clause contained therein. It is well established that the court is not precluded from finding a concluded contract in the face of such a clause if the subsequent conduct of the parties clearly indicates an intention to be bound. [54] The legal principles are aptly summarised by the Federal Court in Charles Grenier Sdn Bhd v Lau Wing Hong [1997] 1 CLJ 625, where the court held that the phrase “subject to contract” does not necessarily negate contract formation if the overall correspondence and conduct shows the parties intended to be bound immediately. The court must examine the circumstances of each case to determine if the “subject to contract” clause was intended by parties to be a mere expression of their desire to formalise already agreed terms, or a condition precedent to binding themselves. Where the parties have identified the subject matter, price, essential terms etc. with sufficient clarity, the court can find an enforceable “open contract” despite the absence of a formal document, and imply necessary terms to give effect to the parties’ objective intentions. [55] In Voo Syun Mui v Yap Mooi Mooi [1984] 2 CLJ 167, the Federal Court held that based on the evidence and conduct of the parties, their intention was clearly to arrive at a definite and complete agreement for the sale of the property. The mere fact that the option to purchase was stated to be “subject to an agreement to be signed” did not necessarily mean there was no legally binding and enforceable agreement yet. Applying Lim Keng Siong & Anor. v Yeo Ah Tee [1983] 2 MLJ 39 (FC), the court found that the parties intended to be bound by the terms in the option letter. The respondent had validly exercised the option by tendering the 10% deposit within the stipulated period, which the appellant had wrongfully rejected. Therefore, the court dismissed the appellant’s argument that there was no concluded contract since no formal sale agreement had been signed. The intention based on evidence was clearly to create binding obligations. [56] Applying the principles from these cases to the facts of this case, although the Letter of Offer was marked “Subject to Contract”, the subsequent conduct of both parties demonstrate their clear intention to be bound by the bargain struck. The certainty of terms is evidenced by the Applicant’s payment of earnest deposits, completion of due diligence, procurement of approvals from PKNK, and drafting of final executable Agreements. The email exchanges from July 2023 dealt merely with logistics of signing, not substantive negotiations, indicating parties had moved to the execution stage of a concluded agreement. The unequivocal acts of part performance such as the Applicant signing the Agreements show an intention to create binding obligations, with the “Subject to Contract” phrase being just an expression to formally record already agreed terms, not a condition rendering the entire bargain non-binding until documentation. Therefore, having regard to the overall factual matrix, it is clear that a complete and binding contract was reached between the Applicant and Respondent on the essential terms of the sale and leaseback as per the duly accepted Letter of Offer, despite the Respondent’s failure to ultimately sign the formal agreements. [57] The words “Subject to Contract” when viewed in light of Clause 2(F) of the Letter of Offer did not negate the existence of a binding contract but merely expressed the parties’ intention to record the agreed terms in a more formalised document. Clause 2(F) states: “Parties shall immediately upon the Vendor’s acceptance of the Offer proceed to negotiate and mutually agree on all the terms and conditions of the SPA. Subject to all terms being finalized and mutually agreed between the parties, and the other conditions stipulated in paragraph (B) above having been fulfilled within the said Period, the parties shall proceed with the execution of the SPA within fourteen (14) working days thereafter.” [58] The evidence shows that parties had expeditiously proceeded to finalise and mutually agree on the terms of the Sale and Purchase Agreement (SPA) after the Respondent accepted the Letter of Offer, with all terms being agreed by 22.7.2023 in readiness for execution by 26.7.2023. The contemporaneous documentary trail does not support the Respondent’s contention that parties were still in negotiations when the Respondent purported to abort the deal on 31.7.2023. [59] In considering whether the words “Subject to Contract” in the Letter of Offer prevented the formation of a binding contract, I considered the parties’ true intentions. Where parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those agreed terms, but propose to have the terms restated in a more formal document that is fuller or more precise but not different in effect, then the execution of the formal document is not a pre-condition to a binding contract. It is merely a formality to record the terms already agreed upon. [60] The parties had finalised all the essential terms in the Letter of Offer and the subsequent conduct of fulfilling conditions, finalising the draft Agreements, and the Applicant signing the Agreements demonstrates their intention to be bound by the agreed bargain. The execution of the formal Sale and Purchase Agreement was not a pre-condition, but just a recording of the terms they had already accepted. [61] Support for this conclusion can be found in the Respondent’s own solicitors’ letter dated 31.7.2023, which made no mention of any outstanding terms remaining to be negotiated. The reason given by the Respondent for not proceeding was that the transaction allegedly did not align with its business plans, thereby implying that the substantive deal had already been struck and accepted by the Respondent, with only the formality of signing remaining. [62] Therefore, I find that the “Subject to Contract” phrase in the initial Letter of Offer did not prevent the formation of a binding contract between the parties once they had performed the substantive agreed obligations and accepted the negotiated terms by July 2023. The formal Agreements were just a recording formality at that stage. [63] The Respondent’s reliance on Ayer Hitam Tin Dredging Malaysia Berhad v YC Chin Enterprise [supra] is misplaced as the facts are clearly distinguishable. That case involved an informal agreement that was “subject to a written contract to be executed” and the Supreme Court found that parties had not even commenced negotiations on the terms of the written contract. In contrast, parties in the present case had diligently proceeded to agree on the terms of the Agreements and were already making arrangements for execution when the Respondent had a change of heart. [64] The High Court case of Low Kar Yit & Ors v Mohamed Isa & Anor does not assist the Respondent. In Low Kar Yit, the option itself was made “subject to a formal contract to be drawn up and agreed upon by the parties”. This condition that a formal contract must be agreed upon preceded any binding agreement. However, here, the Letter of Offer was accepted by the Respondent on 23.3.2023. This acceptance, coupled with the subsequent fulfillment of conditions like payment of deposits, due diligence, obtaining approvals, and finalising the draft agreements, indicates the formation of a binding contract. The requirement to sign formal agreements was not a pre-condition to contract formation in the instant case. Rather, it was merely the final step to execute an already concluded bargain, as evidenced by the parties’ conduct in performing the contractual obligations. Unlike Low Kar Yit, this instant case does not involve an option that was expressly “subject to” agreeing on a formal contract first. The Letter of Offer itself, once accepted, constituted a binding agreement, with the formal documentation being a record of finalised terms. The chronology of events and acts of part performance by both parties here suggest that the formal contract signing was not a condition precedent, but rather an expression of the parties’ desire to have the already-agreed terms formally recorded. [65] Further, the Supreme Court case of Kam Mah Theatre Sdn Bhd v Tan Lay Soon does not assist the Respondent. In Kam Mah Theatre, the proviso stating “the sale and purchase agreement shall incorporate all the terms and conditions herein and other usual terms and conditions and shall be signed on or before 18 March 1989” was found to be equivalent to the phrase “subject to contract”. This raised a strong presumption that a further formal contract was necessary. However, in this present case, there is no such proviso or phrase equivalent to “subject to contract” in the Letter of Offer accepted by the Respondent on 23.3.2023. The Letter of Offer itself constituted the basis of the agreement. In Kam Mah Theatre, the court found cogent evidence that negotiations were still ongoing between the parties, such as the additional conditions in the draft agreement, correspondence indicating lack of finality, etc. In contrast, here, the evidence suggests the parties had finalised all terms and simply needed to sign the formal agreements. The conduct of fulfilling conditions like payment of deposits, due diligence, obtaining approvals from PKNK, etc. indicates the parties had taken steps to perform the already concluded contract. The ambiguity around “usual terms and conditions” in Kam Mah Theatre is absent in this instant case, where the essential terms of the sale and leaseback were clearly spelled out in the Letter of Offer itself. While Kam Mah Theatre raised doubts about contract formation, here, the chronology of events and acts of part performance strongly suggest that the formal contract signing was not a condition precedent, but merely the final step to record the already concluded bargain. [66] The case of Kheamhuat Holdings Sdn Bhd v The Indian Association, Penang also does not assist the Respondent’s case in this dispute. In fact, the Court of Appeal’s reasoning in dismissing the appeal in Kheamhuat actually supports the Applicant position that there is a binding contract. The key points of distinction are: a) The Court of Appeal in Kheamhuat held that the MOU in that case was nothing more than a basis for negotiations and the parties did not intend to be bound until a formal agreement was executed. This was because the MOU itself was expressly subject to a formal agreement being concluded between the parties after their lawyers have studied and advised on the matter. b) In contrast, the Letter of Offer in the instant case, while having the words “Subject to Contract”, contains detailed terms on the essential elements of the transaction like price, property, completion timeline, and is not expressly stated to be subject to a future formal agreement. The Letter of Offer appears intended to be a comprehensive agreement. c) Crucially, in Kheamhuat, none of the conditions precedent set out in the MOU like obtaining consent of members and the court were fulfilled. The Court of Appeal held this meant there was no legally binding contract. d) However, in the instant case, it is the Applicant’s case that all conditions of the Letter of Offer were fulfilled by both sides, like conducting due diligence, procuring third party consent, paying deposit, and finalising the terms of the formal agreements. Unlike Kheamhuat, this points to an intention to be bound. e) The Court of Appeal in Kheamhuat emphasised that even if members had purported to waive the requirement of court approval for dealings with the association’s property, such waiver would be ultra vires the Memorandum and Articles and invalid. The constitutional documents had to be complied with. f) This reasoning is not applicable to the instant case. There is no suggestion that the parties’ performance of the conditions in the Letter of Offer, like the Applicant paying the deposit or conducting due diligence, would be ultra vires or invalid under either party’s constitution. g) Finally, the Court of Appeal found that the conduct of only two individuals who tried to push through the agreement could not be attributed to the whole management committee or the association to establish a binding contract by conduct. h) In contrast, the acts of part performance in the instant case, like paying deposits, procuring approvals and executing agreements, appear to be institutional acts attributable to the Applicant and Respondent as corporate entities, and not just acts of individual office bearers. [67] Therefore, in light of the clear acts of part performance and the advanced stage of the documentations, I find that the Letter of Offer duly accepted on 23.3.2023 did constitute a binding contract between the Applicant and the Respondent, with the “Subject to Contract” clause to be construed as an expression of the desire to formally record the agreed terms rather than a condition precedent to contract formation. Suitability of specific performance order [68] The Applicant submitted that it was entitled to an order for specific performance to compel the Respondent to execute the Agreements as the Respondent had breached the concluded contract by failing to do so. The Applicant contended that damages would not be an adequate remedy as the Property was unique and the Applicant had already taken all steps necessary to complete the transaction, including signing the Agreements and making arrangements to pay the balance deposit. The Applicant relied on Sections 11(1) and 11(2) as well as Illustrations (a) to Section 11(1)(c) of the Specific Relief Act 1950 to argue that specific performance should be granted as a matter of course for contracts relating to immovable property. [69] The Respondent argued that specific performance should be refused as the transaction was not a straightforward sale but involved a complex leaseback arrangement with onerous obligations on the Respondent over many years. The Respondent contended that the court should exercise its discretion not to grant specific performance as the contract was not suitable for specific enforcement akin to an employment contract. [70] I shall begin by setting out the applicable legal principles. Section 11(1) of the Specific Relief Act 1950 provides that subject to the provisions in the Act, specific performance of a contract may in the discretion of the court be enforced when (a) there exists no standard for ascertaining actual damage caused by non-performance; or (b) pecuniary compensation for non-performance would not afford adequate relief. Section 11(2) further provides that the court shall presume, unless the contrary is proven, that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money. Illustration (a) to Section 11(1)(c) makes it clear that a contract for the sale of a house at a stated price is specifically enforceable at the election of the purchaser. [71] The Court of Appeal in Yap Seong Yee v Eureka Property Management Sdn Bhd & Another Appeal [2018] 8 CLJ 713 had occasion to consider the principles governing the grant of specific performance. Citing the Federal Court case of Wong Kup Sing v Jeram Rubber Estates Ltd [1969] 1 MLJ 245, the Court of Appeal held that before granting specific performance, the court must be satisfied that there is a continuance of readiness and willingness on the part of the party seeking such relief to perform his part of the bargain from the date of the contract up to the date of hearing. The party seeking specific performance must not only demonstrate to the court its willingness and readiness to perform his obligation but must also adduce evidence thereof. [72] On the present facts, I find that the Applicant had demonstrated a continuous willingness and readiness to complete the purchase of the Property and leaseback to the Respondent. The contemporaneous documentary evidence shows that the Applicant had conscientiously taken all steps to finalise and execute the Agreements and to fulfill the conditions of sale, including paying the earnest deposit, completing the due diligence, procuring approvals from PKNK, and arranging to pay the balance deposit. The Applicant had by 26.7.2023 signed all the Agreements and was merely awaiting the Respondent’s counter-parts when the Respondent purported to renege on the transaction. The Applicant had via its solicitors’ letter dated 3.8.2023 called upon the Respondent to sign the Agreements and proceed with completion but to no avail. [73] The Respondent’s argument that specific performance is unsuitable due to the nature and duration of the transaction is unmeritorious. This is not a case akin to the enforcement of employment or personal service contracts where the court is slow to decree specific performance due to the undesirability of compelling parties to maintain an ongoing relationship. The transaction concerns a sale and leaseback of immovable property where parties’ obligations are clearly defined by the Agreements with no element of personal service or continuous supervision by the court. The Respondent is essentially seeking to resile from what it now perceives to be an unprofitable bargain but that alone is not sufficient reason for the court to refuse specific performance. [74] I am fortified in this conclusion by the decision in Sekemas Sdn Bhd v Lian Seng Co Sdn Bhd [1989] 1 CLJ 154. In that case, the Federal Court had to determine whether specific performance should be granted to enforce a sale and purchase agreement for land. Despite the purchaser’s inability to pay the balance purchase price due to financial difficulties, the Federal Court upheld the order for specific performance. The court held that the mere fact that the agreement contained a liquidated damages clause did not mean that damages were an adequate remedy or that the parties had agreed damages would be the sole recourse for breach. Importantly, the Federal Court affirmed that in land sale contracts, the burden is on the defendant to rebut the statutory presumption under Section 11(2) of the Specific Relief Act 1950 that monetary compensation cannot adequately relieve the breach. No such rebuttal having been made out, specific performance was rightly ordered. Applying the principles in Sekemas, I find the Respondent has failed to discharge its evidential burden of showing why damages would be an adequate remedy in this case concerning the sale and leaseback of the Property. [75] Further in Ang Siew Hong & Anor v Ang Wee Kiat [2020] 1 LNS 731, the principles applied by the High Court fortify the conclusion that the Respondent should be compelled to specifically perform the contract embodied in the Letter of Offer dated 20.3.2023. Akin to Ang Wee Kiat, the Respondent cannot resile from the concluded bargain merely by stating the transaction no longer “aligns with its business plan”, as mentioned in their solicitors’ letter dated 31.7.2023. Having voluntarily accepted the Letter’s terms after being duly advised by the solicitors at Messrs. Zaid Ibrahim & Co., a leading Malaysian firm, the Respondent is bound by those terms. Upholding commercial certainty requires parties be held to lawfully concluded agreements unless exceptional circumstances justify non-performance, which is not the case here based on the evidence of active fulfilment of the Letter’s conditions precedent. The court ought not permit the Respondent to withdraw from contractual obligations simply because the bargain appears financially disadvantageous in hindsight. As recognised in Ang Wee Kiat, reneging due to pecuniary prejudice alone does not constitute a valid defence when a binding contract was struck. The Respondent has not shown vitiating factors to render specific performance inequitable or oppressive. Conversely, damages would be inadequate for the Applicant who committed resources towards completion expecting the rental income from leasing back the Property. Therefore, the Respondent’s reason of non-alignment with business plans cannot justify withholding the order sought by the Applicant. [76] In the present case, the sale and leaseback of the Property ought to have been completed by the Respondent signing the Agreements as agreed. The Respondent ought not be allowed to evade its contractual obligations by relying on a unilateral change of business plans that is unsupported by cogent evidence. The Respondent has not shown any vitiating factors that would render the decree of specific performance inequitable, oppressive or unjust. On the contrary, damages would not be an adequate remedy for the Applicant who had already committed considerable time and expense towards completion in the expectation of the rental income stream from the long-term leaseback of the Property. [77] Further, Section 11(2) of the Specific Relief Act 1950 mandates that the court presumes that damages are an inadequate remedy for breach of contracts relating to immovable property unless proven otherwise. The Respondent has failed to adduce any evidence to rebut this presumption or to show that the justice of the case warrants the court exercising its discretion to refuse specific performance. [78] On a consideration of the evidence in totality and on a balance of equities, I find that the justice of the case demands the grant of specific performance to compel the Respondent to sign and complete the Agreements. The Applicant has successfully established a concluded contract for the sale and leaseback of the Property and demonstrated its continuous readiness and willingness to perform its obligations thereunder. The Respondent has not shown any valid reason for the court to exercise its discretion to refuse specific performance. Therefore, pursuant to Sections 11, 20 and 21 of the Specific Relief Act 1950, I grant orders for specific performance as prayed for paragraphs (a), (b), (c) and (f). Conclusion [79] In conclusion, having considered the facts, evidence and submissions in totality, I am satisfied that the Applicant has made out a compelling case for the reliefs of specific performance sought against the Respondent. It is evident that a binding contract had been concluded between the parties through the Letter of Offer duly accepted by the Respondent on 23.3.2023 and the subsequent acts of part performance. The Respondent’s reason of the transaction not aligning with its changed business plans is an unacceptable justification to resile from its contractual obligations under the concluded bargain. No exceptional circumstances have been demonstrated to warrant the court exercising its discretion to refuse an order for specific performance. In the interests of upholding commercial certainty and preventing the Respondent from avoiding a bargain that has become financially disadvantageous to it, the orders compelling the Respondent to execute the relevant Agreements and complete the sale, purchase and leaseback of the Property in accordance with the terms of the concluded contract are hereby granted. [80] The court orders as follows: a) Specific performance (Decree for Specific Performance) be ordered against the Respondent’s directors to fulfill the Respondent’s contractual obligations under the letter of offer signed by the Respondent on 23.3.2023 (the Letter of Offer), which includes the signing the following agreements and documents: - i) Sale and Purchase Agreement between the Respondent, as the seller, and the Applicant, as the purchaser; ii) Master Sub-Lease Agreement between the Applicant, as the sub-lessor (“Sub-Lessor”) and the Respondent as the sub-lessee (“Sub-Lessee”); iii) “Deed of Novation Cum Assignment” agreement between the Respondent, Applicant and PKNK; iv) Memorandum of transfer form (Form 14A) for the transfer of the Registered Leases from the Respondent to the Applicant; and vi) All related documents and/or instruments as provided in the agreements listed in sub-paragraphs (i), (ii) and (iii) above; (previously defined as “the Agreements”); b) Consequent to paragraph (a) above, specific performance (Specific Performance) be ordered against the Respondent to execute and complete the transactions according to the agreed terms as stipulated and provided for in the Agreements; c) Specific performance be ordered against the Respondent to fulfill the Respondent’s contractual obligation to fulfill the condition of sale in the Letter of Offer and the Agreements; d) In the event the directors of the Applicant and/or the Respondent fail to complete the execution of the documents as specified in Paragraphs (a)(i) to (v) above within thirty (30) days from the date of the court order, the Deputy Registrar of the court shall sign all documents for the completion of all transactions in the said Agreements; and e) The cost of RM15,000.00 shall be paid by the Respondent to the Applicant subject to allocator fee. 15 July 2024 ATAN MUSTAFFA YUSSOF AHMAD Judge Kuala Lumpur High Court (Commercial Division) Counsel: For the Applicant: Kalearasu K Veloo with Eva Chang Chon Peng (Messrs SF Chan & Co) For the Respondent: CK Ung (Messrs Phee, Chen & Ung)