Tay Yew Chong v Koh Hooi Siang (B-02(NCVC)(W)-2035-10/2018)

YAP HONG YEN

KOH HOOI SIANG … RESPONDEN-RESPONDEN 2 DALAM MAHKAMAH TINGGI MALAYA DI SHAH ALAM (BAHAGIAN SIVIL) GUAMAN SIVIL NO. BA-22NCVC-440-07/2017

KOH HOOI SIANG (NO. K/P: 700129-10-5370) … PLAINTIF PERTAMA

YAP HONG YEN (NO. K/P: 421027-10-5124) … PLAINTIF KEDUA

KOH HOOI SIANG … PLAINTIF KETIGA DAN TAY YEW CHONG … DEFENDAN (NO. K/P: 620512-05-5329) CORAM: VERNON ONG LAM KIAT, JCA (now FCJ) NOR BEE ARIFFIN, JCA HAS ZANAH MEHAT, JCA 3 GROUNDS OF JUDGMENT Introduction [1] The defendant entered into the Sale and Purchase Agreement dated 24.11.2015 ( the SPA) with Low Yew Sun to purchase the latter’s property, a residential land with a three storey semi-detached house erected thereon (the Property). Low Yew Sun who was the defendant’s brother in law and the third plaintiff’s husband, died on 13.9.2016. The defendant had pursuant to the SPA, transferred the Property into his name. The plaintiffs claimed that the transfer was pre-matured, unlawful and null and void. [2] There are two main disputes between the parties: (i) whether the SPA was for the purchase of the Property or it was merely intended to serve as a security for a loan that was given to Low Yew Sun (the deceased) by the defendant and (ii) whether the defendant had breached the SPA. The plaintiffs claimed, inter alia for a declaration that the SPA was determined automatically by reason of the breaches committed by the defendant and for the re-transfer of the Property to the estate of the deceased. The defendant filed a counterclaim, inter alia for specific performance of the SPA or alternatively a refund of the loan sum. [3] The learned Judicial Commissioner (JC) had on 21.9.2018, after a full trial, allowed the claim by the plaintiffs and dismissed the defendant’s counterclaim. The defendant appealed against this order. 4 [4] After perusing the Appeal Records and giving much consideration to the submissions of both parties oral and written, we unanimously allowed this Appeal. We set aside the order of the High Court. In this Judgment, the appellant and the respondents will be referred to as they were in the proceedings before the High Court. The Background [5] The learned JC had set out both the pleaded case of the plaintiffs and the defendant at length. We adopt the facts as narrated by His Lordship JC with suitable modifications. [6] The gist of the plaintiffs’ pleaded case is summarised as follows. Before his demise, the deceased who was facing financial problems, approached the defendant for a loan of RM600,000.00 as a capital for his business and to settle his business debts. [7] The Property was at that material time charged to Alliance Islamic Bank Berhad (the Bank). There was a caveat lodged over it by one Choo Yoong Kian. The plaintiffs claimed that the defendant insisted on settling the overdue debt to the Bank for the housing loan of the Property notwithstanding what the deceased and the third plaintiff wanted was only to obtain a loan of RM 600,000.00. They could afford to pay the monthly instalments to the Bank for the housing loan. [8] However, at the defendant’s insistence, the SPA was executed wherein the deceased agreed to sell and the defendant agreed to 5 purchase the Property at the price of RM1,600,000.00 (the Purchase Price). This was followed by the execution of the Supplemental Agreement and the Personal Guarantee the next day on 25.11.2015. [9] The third plaintiff was a party in the Supplemental Agreement.

the status of the Conditional SPA;

what was the purchase price that the defendant was to pay according to the SPA?

has the defendant discharged his obligations under the SPA by paying to all the creditors as in Clause 2.2 as the Purchase Price and within the knowledge of the deceased and the third plaintiff?

should the Property have been transferred to the defendant?

should the money paid by the defendant amounting to RM1,552,847.01 be forfeited by the plaintiff pursuant to Clause 3.1 of the SPA? [24] His Lordship dealt with each issue in turn. He however omitted to list out as an issue the plaintiffs’ alternative claim on the subject of the 10 illegality and unenforceability of the SPA by reason of it being in disguise of conditional SPA. The said issue was raised by the plaintiffs in their issues to be tried at paragraph 10. The decision of the learned JC when allowing the same was assailed by the defendant in his ground of appeal in paragraphs 14 and 16. [25] The learned JC made the following conclusion in paragraphs 21 and 22 of the Judgment on the issues for determination, as reproduced below- “21. In conclusion to the above, it is my findings as below -

The true intention of the Sale and Purchase Agreement between the Deceased/he Third Plaintiff and the Defendant was that though the Defendant had assisted in paying the Deceased’s debts to various creditors under Clause 2.2 (2.1 to 2.2 (2.6), the property would only be hold as a security and nothing on the transfer of the property in view of the Deceased needs to repay back the Defendant’s loan within a year. Nevertheless, in view of Clause 1.1, 6.1, 2A.6 and 2A.7, the option would be given to the Defendant to keep or sell the Property provided in the following:

The Defendant (Purchaser) paid the Purchase Price amounting to RM1,600,000.00 within 90 days from the date of the Agreement (24 November 2016). This would means that the Defendant would pay 23 January 2016 (Completion Date) or the Extended Date on 23 February 2016; or

(ii) The Vendor (Deceased) to pay the Purchaser (Defendant) the full Purchase Price within one year from the date of the Agreement ie on 25 November 2016.

The Purchase Price of the Property is clearly stated in Clause 1.1 of the Agreement being RM1,600,000.00 (RM1.6 million);

there is nothing or any evidence to prove that the amount of RM1,552,847-01 was not paid by the Defendant through letters dated 18 December 2015, 14 March 2016, 6 May 2016, 27 June 2016, 23 11 August 2016 and 18 November 2016 (Bundle B, page 228.242 to 248), all of which informed the Deceased and the Third Plaintiff of the amount of RM1,552,847-01 which was paid.

The Defendant did not make full payment of RM1,600,000.00 (RM1.6 million) being the Purchase Price of the Property according to the Sale and Purchase Agreement on the completion date or the extended completion date.

Such transfer was pre-mature, void and unlawful and against the provisions in the Sale and Purchase Agreement.

Due to the breach of the terms of the contract, the agreement is automatically determined and the Plaintiff can exercise their rights pursuant to the same and forfeiting the payments made in Clause 1 of the Sale and Purchase Agreement”. [26] The learned JC entered judgment in favour of the plaintiffs and allowed the prayers sought by the plaintiffs in paragraph 26 (1) to (15) in the amended SOC, including the alternative claim. The plaintiff was awarded costs of RM120,000.00. [27] A summary of the learned JC’s decision is this. The SPA was determined automatically as the defendant had failed to pay the full payment of RM1,600,000.00 being the Purchase Price according to the SPA on the extended completion date. The plaintiffs were thus entitled to forfeit the entire sum of RM1,552,847.01. The transfer of the Property to the defendant was declared null and void. The defendant was ordered to re-transfer the Property to the plaintiffs. The plaintiffs was also awarded special damages and general damages to be assessed. Vide the alternative claim of the plaintiffs, the SPA, the Supplemental Agreement and the Personal Guarantee were all declared to be illegal and invalid. 12 Our Decision [28] The reference to the SPA requires clarification. In the pleadings, the plaintiff called it the Conditional SPA ( Perjanjian Jual Beli Bersyarat). The defendant referred to it as the SPA. There is no dispute that the SPA was conditional as stated in Clause 2A.1 which read - “2A.1 The parties herein hereby agree that the sale and purchase herein is conditional upon the following:-

2A.2 The Vendor undertake to make or remove the caveat entered by the caveator within one (1) month from the date of this Agreement at the Vendor cost and expenses.

2A.3 The Vendor undertake to pay or repay to the Purchaser the full Purchase Price within one (1) year (“the Repayment Period”) from the date of this Agreement.

2A.4 The Purchaser agrees to let the Vendor occupied or stay on the Property within the Repayment Period subject to the Vendor fully settled all the quit rent, assessment, telephone, electricity, water, indah water, service charge, and other payment in respect of the Property.

2A.5 Both parties agree that if the Vendor have fully repaid the Purchase Price to the Purchaser within or before the Repayment Period, the Purchaser agrees to transfer/sell back the property to the Vendor and the Vendor agrees to pay all cost and expenses in respect of the said transfer/sell including the stamp duty, legal fees and the Real property Gains Tax (RPGT) on behalf of the Purchaser.

2A.6 In the event the Vendor fails to pay to the Purchaser the Purchase Price within the Repayment Period, the Purchaser shall have the right to keep or sell the said Property to recover the said Purchase Price, cost, stamp duty, the Purchaser’s Solicitors legal fees, Real property Gains Tax (RPGT), and all other costs and expense in respect of the said Property.

2A.7 If the selling price after the Repayment Period expire is more than the Purchase Price, then the Purchaser agrees to refund any surplus from selling of the said Property to the Vendor (if 13 any) after the deduction of the cost mentioned in the Clause 2A.6 hereinabove.

2A.8 However, if the selling price of the Property is less than the Purchase Price herein stated, the Vendor undertake to pay the shortfall of the said payment equal to the Purchase Price including all cost incurred from the selling of the Property by the Purchase to the third party.” [29] The plaintiffs did not in their pleadings identified what could be any condition other than those found in Clauses 2A.2 – 2A.8 above. The “Conditional SPA” and the SPA actually refer to one and the same SPA dated 24.11.2015. To avoid any confusion, the expression the SPA will be used in this Judgment since it is the expression used in paragraph 6 of the Statement of Agreed Facts and the learned JC himself had made reference only to the same. [30] This case turns on the construction of the SPA, the Supplemental Agreement and the Personal Guarantee. When construing a contract document, there are several legal principles that have to be considered of which the learned JC seemed to have overlooked. [31] It is of utmost importance to bear in mind that the sole function of the court in construing a document is with a view to finding the intention of the parties. In Raja Zainal Abidin bin Raja Haji Tachik & Ors v British-American Life & General Insurance Bhd [1993] 3 MLJ 16), Peh Siew Chin SCJ in delivering the decision of the Court said that “.. The function is in reality to find the meaning of the words, for such meaning is equivalent to such intention of the parties for the purpose of interpretation.” 14 [32] The approach the Court should adopt when asked to determine the true nature of the bargain between contracting parties is an objective approach. The Federal Court in SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464 said at page 483 of the report - “[44] Where the natural meaning of the contract is not clear and in particular absence of words to the effect mentioned above, the principles in ICS in their qualified form (see [28] which qualifies its application vis-a vis extrinsic evidence), remain applicable and relevant to the construction of the contract such as to enable the court to objectively determine ‘the meaning which the contract would convey to a reasonable person having all the background knowledge… available to the parties’. [45] The principles of Lord Hoffmann were summarised in Berjaya Times Square Sdn Bhd (formerly known as Berjaya Ditan Sdn Bhd) v. M. Concept Sdn Bhd [2010] 1 MLJ 597 at [42] 620G. Gopal Sri Ram FCJ, who delivered the leading judgment of the court stated:- Here it is important to bear in mind that a contract is to be interpreted in accordance with the following guidelines. First, a court interpreting a private contract is not confined to the four corners of the document. It is entitled to look at the factual matrix which forms the background to the transaction. Second, the factual matrix which forms the background to the transaction includes all material that was reasonably available to the parties. Third, the interpreting court must disregard any part of the background that is declaratory of subjective intent only. Lastly, the court should adopt an objective approach when interpreting a private contract. (Emphasis added.) [46] This objective approach to interpretation is the ‘ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation which they were at the time of the contract’ (K.Lewison, The Interpretation of Contracts (5th Ed, 2011), Sweet and Maxwell, at 1.03).” 15 [33] It is elementary that in construing a contract, the whole contract has to be considered with reference to its object and the whole of its terms (see Chitty On Contracts Vol. 2012 Thirty-First Edn. at p. 943). In SPM Membrane Switch Sdn Bhd (supra), the Federal Court held that the Court must approach the interpretation of a contract holistically, no term is to be taken or interpreted in isolation. [34] The Court cannot be rewriting the contract for the parties by imposing a term which could not be imported into the contract or go behind the written terms of the contract to introduce or add new terms to it (see Shell Malaysia Tradings Sdn Bhd v Lim Yee Teck & Ors [1982] 2 MLJ 181, Koh Siak Poo v Perkayuan OKS Sdn Bhd & Ors [1986]3 MLJ 164, Ong Thye Peng v Loo Choo Teng & Ors [2008] 4 MLJ 31 and Dato’ Shazryl Eskay bin Abdullah v Merong Mahawangsa Sdn Bhd & Anor [2014] 3 MLJ 892). [35] In cases where several contracts are contemporaneously executed, the Federal Court in Damansara Realty Bhd v Bungsar Hill Holdings Sdn Bhd & Anor [2011] 6 MLJ 464 held that the general rule is that reference should be made to all the deeds to ascertain the intention of the parties. [36] Learned counsel for the plaintiffs’ submission that the SPA stand alone as it was entered into on 24.11.2015 while the other two contract documents were made on 25.11.2015, is misconceived. On the facts, the SPA, the Supplemental Agreement and the Personal Guarantee were contemporaneously executed. They are obviously connected to each other and form a single transaction. Thus all the three contract documents have to be read as a whole to comprehend their meanings, purport as 16 well as their aim and object (NVJ Menon v The Great Eastern Life Assurance Co Ltd [2004] 3 MLJ 38). [37] It is trite that the construction of a contract is a question of law for determination by the court and not by the witnesses through their oral evidence (NVJ Menon (supra)). We observed that one of the defendant’s complaint in this Appeal was that the learned JC had premised his findings primarily on the evidence of the third plaintiff. There was truth in this complaint. The learned JC’s reliance on the oral evidence of the third plaintiff was rather overwhelming as the excerpts of her testimonies appeared in many part of His Lordship’s Judgment (see paragraphs 9, 10,11,13,14,15,16). Inevitably, the assumption is that the third plaintiff’s testimonies was given considerable consideration as His Lordship’s finding was by and large consistent with the position taken by the third plaintiff in her evidence. The observation by the Court of Appeal in NVJ Menon (supra) as to the irrelevancy of the oral testimonies of the witnesses and the effect of reliance by a judge upon it for the interpretation of the agreements and circulars, is instructive - “ 17. As Lord Diplock observed in Bahamas International Trust Co. Ltd And Another v Threadgold [1974] WRR 1514: In a case which turns, as this one does, on the construction to be given to a written document, a court called on to construe the document in the absence of any claim to rectification, cannot be bound by any concession made by any of the parties as to what its language means. That is so even in the court before which the concession is made; a fortiori in the court to which an appeal from the judgment of the court is brought. The reason is that the construction of a written document is a question of law. It is for the judge to decide for himself what the law is, not to accept it from any or even all of the parties to the suit; having so decided it is his duty to apply it to the facts of the case. He would be acting contrary to his judicial oath if he were to determine the 17 case by applying what the parties conceived to be the law, if in his own opinion it were erroneous."

When it comes to the meaning of words, it does not matter whether they appear in a contract or written law, the result is the same. The point is illustrated by the judgment of Thompson J, (as he then was) in Reynolds v Public Prosecutor [1956] MLJ 101, at p 103: …….

So too here. It matters not a jot to us what the plaintiff thought his entitlements under the contract with the defendant were. Neither does it matter to us what the defendant's witnesses thought of the way in which that contract ought to be interpreted. Their views are entirely irrelevant; as irrelevant as the views of the witnesses who gave their interpretation of the financial orders in Reynolds.

In the instant case, the learned judge referred to the oral testimony and relied upon it for the interpretation of the agreements and circulars. That, in our view is clearly an inadmissible method of construction. …”. [38] We observed that not only his approach to construction of the contract documents was not consistent with established principles, the learned JC also erred in failing to appreciate the surrounding circumstances relating to the making of the SPA and in particular the Supplemental Agreement and the Personal Guarantee. His Lordship approached the issues based solely on the SPA. The Supplemental Agreement and the Personal Guarantee did not come under his scrutiny. [39] His Lordship had outlined the background of what eventually lead to the making of the SPA, the Supplemental Agreement and the Personal Guarantee but they were confined to the pleaded case of the parties and the testimonies of the witnesses. Proper and adequate analysis of the three contracts documents entered into by the parties that would have 18 shed light into what exactly was the background of and the parties’ contractual bargains, was not undertaken. There should have been such an analysis, more so when there was no findings of fact by the learned JC that the SPA, the Supplemental Agreement and the Personal Guarantee were entered into by the deceased and the third plaintiff under duress or involuntary. [40] The SPA, the Supplemental Agreement and the Personal Guarantee read together showed that the contracts were entered into because the deceased was in financial distress. He desperately needed a loan from the defendant to settle his debts with the third parties and the Bank. This is expressly stated in recitals (d) and (e) of the SPA as reproduced verbatim below - “(d) The Vendor have been desperately need the money to settled the debt owing to the third parties and the Purchaser have agreed to borrowed/lend/pay the money to the Vendor or on behalf of the Vendor, for the sum equal to the Purchase Price only subject to the condition precedent mentioned in this Agreement.

The Vendor(s) have agreed to sell and the Purchaser(s) has agreed to purchase the said Property at the price and subject to the terms and conditions hereinafter contained.” [41] This is further amplified in recital (a) and (b) of the Supplemental Agreement as reproduced verbatim below – “a) The Vendor have been desperately need the money to settled the debt owing to the third parties and the Existing Financier and the Purchaser have agreed to borrower/lend/pay the money to or on behalf the Vendor to enable the Vendor to settled the said debt to the third parties and the Existing Financier.” 19 [42] We opined that had the learned JC read the SPA along with the Supplemental Agreement and the Personal Guarantee and disregarding the oral views of the witnesses on the interpretation of the SPA, His Lordship would have come to a finding that the SPA was an agreement governing the repayment of the loan to be extended by the defendant and to be secured by the Property. [43] Recital (b) of the Supplemental Agreement explained it all - “b) The Purchaser and the Vendor had entered Sale and Purchase Agreement dated 24.11.2015 as agreement to secure the repayment of the loan and the purchase of the Property on terms and conditions therein contained (hereinafter collectively referred to as “the SPA Agreement”).” [44] There is no dispute that the loan granted to the deceased was the Purchase Price for the Property [45] The SPA could have been better drafted. Clause 1 in particular, is not the usual standard clause that one would have come across. In Clause 1.1, the Purchase Price and the deposit was the same amount, i.e. RM1,600,000.00. There was no percentage specified that constituted the deposit. Clause 3.1 provided that if the balance Purchase Price is not paid within the stipulated period, the sum paid pursuant to Clause 1 shall be forfeited. But there was no balance Purchase Price. While in Clause 1.1 the deceased had acknowledged receipt of payment of RM1,600,000.00, in contrast, Clause 2.2 made provision that the payment of the Purchase Price was to be paid directly by the defendant to the 20 deceased’s third party creditors and the Bank, within the period specified in Clauses 2.1 and 3 of the SPA. [46] Granted that the natural meaning of the SPA was not clearly made out in certain provisions, however, if the SPA is taken together with the Supplemental Agreement and the Personal Guarantee along with the factual matrix which formed the background to this so called family transaction, one could see that the SPA was a means by which the defendant ensured that his friendly loan to his brother–in-law would be protected by security in the form of the Property. The contractual obligations of the parties were quite clearly spelt out therein. [47] The defendant’s contractual obligations, amongst others and most importantly, was to pay the Purchase Price within the period stipulated in the SPA. The deceased and the third plaintiff were to ensure the repayment of the Purchase Price/the loan sum within the Repayment Period. To secure the repayment of the loan granted to the deceased, if the defendant made the payment of the Purchase Price within the stipulated period, the defendant could have the Property transferred to his name. But as the loan was in the first place, granted to assist the deceased extinguishing his debts to third party creditors and the Bank, the interest of the deceased and the third party over the Property was also taken into account. The transfer in the first instance was not intended to be absolute. [48] The SPA and the Supplemental Agreement made provisions that if the deceased and the third party were to pay back the Purchase Price or the loan sum within the Repayment Period, the defendant was 21 contractually bound to transfer or sell back the Property to the deceased. Clauses 2A.1 to 2A.8 of the SPA in our view were incorporated to safeguard the interests of the deceased. The deceased and his family were permitted to continue occupying the Property pending the deceased’s repayment of the loan at the end of the Repayment Period. The deceased was only required to pay for the usual utilities and other statutory payments. There was no mention about payment of rentals. Evidently, the deceased and his family had in fact benefitted from such arrangement and this is in contrast to the claim by the plaintiffs that the SPA was more favourable to the defendant as opposed to their interests. The Repayment Period, for example, was longer than the period the defendant was to effect the Purchase Price. [49] In the circumstances, in our view, the key issues to be determined are basically three - fold. First, whether the Purchase Price was RM1,600,000.00 or RM1,552,847-01? Second, whether the defendant had paid the full Purchase Price within the timeline in Clause 2 or 3 of the SPA? Third, whether the deceased and/or the third plaintiff had repaid the loan sum within the Repayment Period? RM1,600,000.00 or RM1,552,847.01? [50] On the first issue, the learned JC found at paragraphs 13 and 14 – “13 Having considered the Defendant’s testimonies and others, though the issue of Purchase Price was strongly opposed by the Plaintiff and be seriously challenged, I hardly find anything be it any evidence, documentary evidence or the lawyer’s notes to confirm that the purchase was RM1,552,847-01 and not RM1,600,000.00…” 22

… it is my considered view that the Purchase Price of the Property is clearly stated in Clause 1.1 of the Agreement being RM1,600,000.00.(RM1.6 million). In pursuant to the documentary evidence adduced and all the witnesses that gave evidence admitted that the Agreed Purchase Price according to the Agreement is RM1.6 million. The Defendant and all his witnesses although admitted that the price stated in the agreement is RM1.6 million allege vide their oral evidence that it is the intention of the parties that the purchase price is only an estimated sum but in the absence of any contemporaneous documentary evidence had failed to establish the same either by way of notes by the solicitors in charge of the relevant file, recordings or any minutes of the meeting held between the parties. In view of this, to my mind, it is trite laws that the documentary evidence outweighs the oral evidence. This is clearly in pursuant to Sections 91,92,93 and 94 of the Evidence Act as quoted below: ..” [51] The above paragraphs clearly show that the learned JC had chosen to read Clause 1.1 to the exclusion of Clause 2. He ignored the plain language of Clause 2 which made provision not only of the Purchase Price but went further to describe how the payment of the Purchase Price was to be effected by the defendant. The importance of the two Clauses merit reproduction -

1.1 In consideration of the sum of RINGGIT MALAYSIA ONE MILLION AND SIX HUNDRED THOUSAND (RM1,600,000.00) Only (hereinafter referred to as “the Purchase Price”) now paid by the Purchaser(s) to the Purchaser(s)’ Solicitors as stakeholder to be secured by way of deposit and payment towards the purchase price (the receipt of which sum the vendors(s) hereby acknowledge) the Vendor(s) shall sell and the Purchaser(s) shall purchase the said Property free from all charges, caveat, encumbrances and with vacant possession in such state and condition at the time of inspection (fair wear & tear excepted) consisting of furnishing, fixtures, and fittings as specified in Inventory List of The Appendix A (if any) but subject to all conditions of Title whether express or implied and to the existing 23 category of use at an agreed price of RINGGIT MALAYSIA ONE MILLION AND SIX HUNDRED THOUSAND (RM 1,600,000.00) Only (hereinafter referred to as “the Purchase Price”) upon the terms and conditions hereinafter contained.”

2.1. Payment of the Purchase Price in respect of the said Property shall be made by the Purchaser to the Purchaser(s)’ Solicitors as stakeholder within Ninety (90) days from the date of this Agreement SUBJECT TO the Vendor undertake to remove the caveat enter by the caveator within one (1) month from the date of this Agreement failing which the completion date shall be extended free from interest until the said caveat is removed (hereinafter called “the Completion Date”). until the removal of the caveat.

2.2 Both parties hereby agrees on the following terms for the payment of the Purchase Price in respect of the said Property shall be made as follows:-

2.1 the sum of RINGGIT MALAYSIA THREE HUNDRED THOUSAND (RM300,000.00) only to M/S KHOR & RAFIDAH;

2.2 the sum of RINGGIT MALAYSIA ONE HUNDRED THOUSAND (RM100,000.00) only to GO KIM SENG;

2.3 the sum of RINGGIT MALAYSIA SEVENTY THOUSAND (RM70,000.00) only to ENG LEE HOON;

2.4 the sum of RINGGIT MALAYSIA SIXTY SEVENTY THOUSAND SIX HUNDRED FIFTY THREE AND CENT NINETY THREE (RM67,653.93) only to LAVENDA BUILDING;

2.5 the sum of RINGGIT MALAYSIA FIFTY THOUSAND (RM50,000.00) only to MR. LEE SOON TECK;

2.6 the sum of RINGGIT MALAYSIA NINE HUNDRED THOUSAND (RM900,000.00) only to ALLIANCE ISLAMIC BANK BERHAD (Company No: 776882-V), the existing financier of the said Property; 24

2.7 the sum of RINGGIT MALAYSIA ONE THOUSAND TWO HUNDRED EIGHTY SEVEN (RM1,287.00) only to the Purchaser’s Solicitors as legal fees and disbursement; and

2.8 any balance of the Purchaser Price shall be used to pay the stamp duty of the transfer of this Property to the Purchaser and the Purchaser’s Solicitors legal fees and disbursement.”. [52] It is pertinent to note despite the acknowledgment of receipt of the Purchase Price in Clause 1, there was in fact no payment of RM1,600,000.00 Purchase Price made to the deceased (see the learned JC’s observation at paragraph 20 (b) of the Judgment and learned counsel for the plaintiffs’ submission at paragraph 1 at page 68). This is simply because the payment of the Purchase Price was to be paid in accordance with the terms stipulated in Clause 2. Clause 2.1 prescribed the period within which the payment of the Purchase Price was to be paid. Clause 2.2 prescribed that the Purchase Price was to be applied directly by the defendant towards extinguishing the deceased’s various outstanding debts to third parties and the Bank. [53] Clause 2 of the Supplemental Agreement confirmed that the intended payments was to be made to the third parties. It states – “ 2. The parties hereby agrees on the following conditions for the payment for the Loan in respect of the said Property shall be made to the third party pursuant to the SPA Agreement.” [54] While Clause 1.1 specified that the Purchase Price was RM1,600,000.00, the Purchase Price cum the total loan to be paid to 25 the third parties and the Bank as listed out in Clause 2.2 came up to RM1,552,847.01 only. How do we reason this out? [55] If one chooses to read Clause 1.1 independently of Clause 2, as the learned JC had done, the answer would be that the full Purchase Price was RM1,600,000.00 and no other amount. But if Clauses 1 and 2 are taken together, it would show that RM1,600,000.00 was not the actual Purchase Price and what constituted the Purchase Price was the actual amount paid by the defendant pursuant to Clause 2.2 [2.1] to 2.2 [2.8], and in this case, the amount was RM1,552,847.01. We say so for the following reasons. [56] The various payments to the deceased’s third party creditors and the Bank were set out in Clauses 2.2 [2.1] to 2.2 [2.7]. The list of creditors were given by the deceased. It is pertinent to note the learned JC’s finding of facts that the deceased and the third plaintiff were informed of the amount of RM1,552,847-01 which was paid through letters dated 18 December 2015, 14 March 2016, 6 May 2016, 27 June 2016, 23 August 2016 and 18 November 2016. This finding was unchallenged and it essentially negated the plaintiffs’ contention that the deceased and the third plaintiff were in the dark over the payments that were made. [57] The payments were all paid off by the defendant by 10.3.2016, within the extended period (the last date being on 23.3.2016) which was 6 months before the demise of the deceased on 13.9.2016. Evidently, there was no objection registered by the deceased and/or the third plaintiff at the material time that the manner of payment of the Purchase Price was wrong or they had never agreed to the same. Neither did the deceased 26 nor the third plaintiff ever raised the issue that the amount paid was short of RM1,600,000.00, i.e. less RM47,706.99 and that since the defendant had not paid the difference, the deceased was entitled to invoke Clause 3.1. In law, they are deemed to have accepted that the payment of the entire Purchase Price was to be paid in accordance with Clauses 2.2 [2.1] to 2.2 [2;8] and such manner of payment and the amount so paid, were binding on them. [58] The reason why the deceased and the third party had agreed to the manner of payments as effected by the defendant is obvious. That is because when the deceased and the defendant executed the SPA, the parties were aware that the figure RM1,600,000.00 was an estimate of the deceased’s outstanding debts to the third party creditors and the Bank as the deceased then was unsure of the exact quantum of his debts. DW1 explained that the parties at that point of time when the SPA was signed did not know the full amount and it would only be known when the Bank released the redemption statement and if the deceased succeeded in getting discounts from his creditors. So the amount was capped at RM1,600,000.00. The defendants testified that the amount was capped and estimated at RM1,600,000.00 for similar reason as the deceased’s debts was then already RM1.5 million and payment to the Bank was a few months in arrears. The reasons given by the defendant were not without basis. The learned JC himself had made reference to the difference sum in the redemption payment due to the Bank, namely between RM900,000.00 as specified in the SPA and the actual payment of RM905,182.08 as specified in the amended SOD and the evidence adduced during the trial. Most telling that RM1,600,000.00 was an estimate is recital (C) of the Personal Guarantee which reads – 27 “(C) Under the SPA Agreement, the Buyer has agreed to make available to the Borrower a loan of up to the maximum aggregate principal amount of Ringgit Malaysia One Million Six Hundred Thousand (RM1,600,000.00) (hereinafter referred to as “the Loan”) only and the Borrower agreed, covenanted and undertook to repay and pay all loan sums and all other moneys and liabilities whatsoever owing or payable in respect of the loan and under the SPA Agreement and Supplemental Agreement upon the terms and subject to the conditions contained therein. [Emphasis added] Given the circumstances, the third plaintiff cannot be heard to say that the Purchase Price of RM1,600,000.00 was not an estimation. [59] As RM1,600,000.00 was an estimate, we agree with learned counsel for the defendant that the difference between the amount paid of RM1,552,847.01 and the Purchase Price of RM1,600,000.00 as specified in Clause 1.1 was explained by the provision of Clause 2.8. We are of the view that Clause 2.2 [2.8] admits of no ambiguity. The creation of Clause 2.2 [2.8] was to cater for the balance of the Purchase Price after the payments specified in Clauses 2.2 [2.1] to 2.2 [2.7] had been made, to pay the stamp duty and Solicitors legal fees and disbursement. The deceased had agreed to the creation of Clause 2.2 [2.8] and it’s binding on the parties. [60] It follows therefore that it was the true intention of the parties that the payments made pursuant to Clauses 2.2 [2.1] to 2.2 [2.8] of the SPA would constitute the full Purchase Price. It makes no difference if the 28 payments defrayed eventually came up to RM1,600,000.00 or only RM1,552,847.01, as the case here. It would certainly make a huge difference if there is a provision in the SPA or even in the Supplemental Agreement and Personal Guarantee stating to the effect that any balance from the payments effected pursuant to Clauses 2.2 [2.1] to 2.2 [2.8], if the amount was less than RM1,600,000.00, had to be paid back to the deceased. But there was none. Again, the plaintiffs are bound by the terms the deceased had agreed with the defendant that under the present circumstances, the Purchase Price was not the RM1,600,000.00 but RM1,552,847.01. In all these instances, it is the Court’s duty to preserve the sanctity of the contract freely entered into by the parties (see Maxisegar Sdn Bhd v Silver Concept Sdn Bhd [2005] 5 MLJ 1) and to give effect to the bargain of the parties according to their intention (Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 4 MLJ 357 and Setapak Heights Development Sdn Bhd v Tekno Kota Sdn Bhd [2006] 2 CLJ 337). Consequently, nothing turns on the late payment of RM47,706.99. There should not be any admission of liability attached to it. Whether the defendant had paid the full Purchase Price? [61] This brings us to the second issue, the compliance by the defendant with regard to the payment of the Purchase Price. It begins with Clause

Failure to comply with the timeline in Clause 2, the defendant is to be granted extension of time under Clause 3. Failure to comply with Clause 3 will end up in the forfeiture of the sum paid pursuant to Clause 1. Clause 3 is reproduced below – 29 “3. EXTENDED COMPLETION DATE

3.1 In the event that the Purchaser(s) are unable to pay the balance price within NINETY (90) DAYS in pursuant to Clause 2, the Vendor(s) shall allow the Purchaser(s) an extension of THIRTY (30) DAYS to pay the same (hereinafter all “the Extended Completion Date”) PROVIDED ALWAYS THAT the Purchaser(s) shall pay to the Vendor(s) interest at a rate of Eight per cent (8%) per annum calculated to daily basis on the actual outstanding balance purchase price and if the balance purchase price is not paid within the period stipulated herein, this Agreement shall determine automatically and upon such determination the Vendor(s) shall forfeit the sum paid pursuant to Clause 1 hereinabove and thereafter the Vendor(s) shall be at liberty to sell or otherwise deal with the said Property in such manner as they shall think fit without being accountable to the Purchase(s) for any profit on such sale or dealing. Notwithstanding the period of completion stated therein, it is to be agreed between the parties hereto that any delay by the Vendor(s) in excess of fourteen

day in replying correspondence and/or providing necessary documents required for disbursement of the said Loan shall not be taken into account in the computation of the Completion Date and/or the Extended Completion Date (as the case may be), shall be extended to a time equivalent to the excess period of delay until the same is attended to.” [62] We reiterate that the defendant had paid off all the deceased’s creditors as listed out in Clause 2.2 [2.1] to 2.2 [2.8], totalling RM1,552,847.01, the first and the last payment being on 24.11.2015 and 10.3.2016 respectively (see paragraph 8 of the amended SOD). The payments were thus effected within the extended period of 30 days pursuant to Clause 3.1 of the SPA (which ends on 23.3.2016). [63] As the payments were effected within the timeline stipulated in Clause 2.1 of the SPA, there was therefore no breach of the terms of the SPA by the defendant that could render the agreement automatically determined, and there was nothing to forfeit. The provision of Clause 30 3 therefore bears no relevance and the invocation thereof by the learned JC was without basis and plainly erroneous. The forfeiture of the entire sum of RM1,552,847.01 was plainly erroneous. [64] It is trite law that only a true deposit paid to ensure performance of the contract is subject to forfeiture (see Linggi Plantations v Jagatheesan [1972] 1 MLJ 89; Cubic Electronics Sdn Bhd (In Liquidation) v MARS Telecommunications Sdn Bhd [2019] CLJ 723 ). We reproduce below the following observation of Lord Hailsham L.C in Linggi Plantation (supra), on the subject “deposit”, “earnest money” and part-payment” at pages 93 and 94 of the report - “…There is in their Lordships' judgment no difference in this context between the expression "deposit" and the expression "earnest money". In this context they are two words for the same thing, although in common modern English usage "earnest money" has a slightly archaic ring. As Fry L.J. said in Howe v. Smith at page 101: "It (i.e., the deposit) is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by fear of its forfeiture a motive in the payer to perform the rest of the contract." It is worth pointing out that the contract in Howe v. Smith provided that the sum of £500 there in question was as here paid "as a deposit and in part payment of the purchase money" and Cotton L.J. at page 95 in referring to the judgment of James L.J. in Ex parte Barrell LR 10 Ch 512, said: "What is the deposit? The deposit, as I understand … is a guarantee that the contract shall be performed. If the sale goes on of course, not only in accordance with the words of the contract, but in accordance with the intention of the parties in making the contract, it goes in part payment of the purchase money for which it is deposited; but if on default of the purchaser the contract goes off, that is to say, if he repudiates the contract, then … he can have no right to recover the deposit." Or, more simply, in the words of Lord MacNaghten in Soper v Arnold

14 App Cas 429 at page 435: 31 "Everybody knows what a deposit is, … The deposit serves two purposes – if the purchase is carried out it goes against the purchase money – but its primary purpose is this, it is a guarantee that the purchaser means business; and if there is a case in which a deposit is rightly and properly forfeited it is, I think, when a man enters into a contract to buy real property without taking the trouble to consider whether he can pay for it or not." [65] On the facts of the present case, we are of the view that on a true construction of the SPA, there was no deposit intended to secure the future performance of the SPA, and there was also no a part-payment. We accept learned counsel’s argument that in the circumstances of the present case, it was not necessary for such a deposit because the mechanism of the SPA was solely to ensure that the Property served as security in the event that the deceased defaulted in repaying the sum loaned out to him. [66] Given that all payments were fully effected by 10.3.2016 and the deceased having signed the memorandum of transfer on 25.2.2016, the defendant was permitted to transfer the Property to his name pursuant to Clause 6.1, which he did on 13.11.2016, Clause 6.1 reads – “6. EXECUTION OF MEMORANDUM OF TRANSFER

6.1 Upon the execution of this Agreement the Vendors(s) shall cause and the Purchaser(s) shall execute a valid and registrable Memorandum of Transfer of the said Property in favour of the Purchaser(s) which shall be held by the Purchaser(s)’ Solicitors for submission to the Collector of Stamp Duties for adjudication and proved the balance of purchaser price shall have been paid pursuant to Clause 2 hereto or due payment of the different between balance of purchase price and the said Loan shall, have been deposited with the Purchase(s)’ Solicitors.” 32 [67] Clause 6.1 must be read together with Clause 2A.3 of the SPA and Clause 3 of the Supplemental Agreement. There can be no dispute that the language in Clause 6 read together with Clause 2A.5 of the SPA and Clause 3 of the Supplemental Agreement as regards the transfer, were plain and unambiguous. The three provisions enabled the defendant to transfer the Property to his name if he satisfied the requirement in Clause 6.1 of the SPA. [68] It is most unfortunate that the learned JC had proceeded to consider Clauses 1.1, 6.1, 2A.6 and 2A.7 but somehow omitted to appreciate the effect of Clause 2A.5 of the SPA (see paragraph 35 of this Judgment) and Clause 3 of the Supplemental Agreement. Clause 3 of the Supplemental Agreement contain substantially similar provision as in Clause 2A.5. We reproduce it for ease of reference – “3. The parties agree that if the Vendor have fully repaid the loan sum or the Purchase Price to the Purchaser within the repayment period, the Purchaser agrees to transfer/sell back the Property to the Vendor and the Vendor agrees to pay all cost and expenses in respect of the said transfer/sell including the stamp duty, legal fees and the Real Property Gains Tax (RPGT).” [69] By failing to read Clause 2A.5 of the SPA and Clause 3 of the Supplemental Agreement, the learned JC failed to give effect to the words “the Purchaser agrees to transfer/sell back the Property to the Vendor” appearing in both provisions. Pursuant to both Clauses, following the transfer of the Property to his name on 13.11.2016, the defendant was contractually bound, if the third plaintiff (the deceased died on 13.9.2016) have fully repaid the RM1,552,847.01 to him within or before the 33 Repayment Period, i.e. by 23.11.2016, to re-transfer or sell back the Property to the plaintiffs. The defendant can only exercise the right to keep or sell the Property pursuant to Clauses 2A.6 should there be no repayment received by 23.11.2016. The defendant would only be in breach of his contractual obligation under the SPA and the Supplemental Agreement if he had received the payment of RM1,552,847.01 on or before 23.11.2016 and he refused to transfer or sell back the Property to the deceased’s estate, which is not the case here. Thus, given the circumstances, the transfer cannot be pre-mature, void and unlawful and against the provisions in the SPA. Conversely, it was validly executed by the defendant in accordance with the provisions of both the SPA and the Supplemental Agreement as agreed by the deceased and the third plaintiff. [70] The learned JC fell into error when he opted to rely on the evidence of the third plaintiff to find that the parties had agreed that the transfer could only be effected upon the expiration of the Repayment Period if the deceased failed to make the repayment in total disregard of the clear and unambiguous language of Clauses 6.1 and 2A.5 of the SPA and Clause 3 of the Supplemental Agreement. The Court should not have been persuaded in this instance to rewrite the SPA to introduce or add new terms to it. Whether the deceased and/or the third plaintiff had repaid the loan sum within the Repayment Period? [71] On the third issue, it was not refuted that neither the deceased nor the third plaintiff had settled the said amount within the Repayment Period or at all. In that event, the SPA entitled the defendant to invoke 34 Clause 2A.6 of the SPA to keep or sell the Property to recover the Purchase Price and other incidental costs. Clauses 2A.7 and 2A.8 are consequential provisions should a sale take place. [72] It is patently clear that the learned JC’s decision has resulted in the plaintiffs being unjustly enriched at the expense of the defendant. It is unjust for the plaintiffs to be allowed to forfeit the entire RM1,552,847.01 and at the same time be permitted to retain the ownership of Property. In other words, the plaintiffs did not have to pay back the loan, had their debts to the third parties creditors including the Bank paid off and owned the Property that was no longer encumbered. The learned JC’s decision in no uncertain terms, had caused gross injustice to the defendant who at the end of the day, was left with no remedy whatsoever. He could not recover the RM1,552,847.01. He had lost the security to recover his money. He was even denied the right to enforce the Personal Guarantee against the third plaintiff by reason of the alternative claim that the plaintiffs had succeeded to obtain. In this regard, it is worthy to note that the learned JC had proceeded to make an order on the alternative claim in paragraph 15 of the SOC notwithstanding that the issue of illegality of the contract documents was not addressed. In any event, on the facts of the case, the plaintiffs had not made out a cause of action on the illegality of the contracts document (see the Federal Court case of Ngui Mui Khin v Gillespie Bros & Co Ltd [1980] 2 MLJ 9). The alternative order was thus erroneously granted. Conclusion [73] For the reasons we had adumbrated, the errors committed by the learned JC warranted our appellate intervention. We set aside the High 35 Court order dated 21.9.2018. The plaintiffs’ claim is dismissed with costs. We allow the defendant’s counterclaim with costs in term of prayers 34

(a), (b) and (c) (i) and (ii) of the amended SOD. We make an order for costs of RM135,000.00 for here and below. We also make a consequential order that the plaintiffs to refund the High Court costs of RM120,000.00 and deliver up to the defendant’s counsel the Form 14A and any other documents that were held by the plaintiffs’ counsel within 14 days. Dated 15 October 2020 NOR BEE BINTI ARIFFIN Judge Court of Appeal Putrajaya Parties Appearing: For the Appellant Ranjit Singh Villie Nethi Abd. Halim Louis Liaw Vern Xien Messrs. Ramrais & Partners Advocates & Solicitors Level 31, Menara TH Perdana 1001, Jalan Sultan Ismail 50250 Kuala Lumpur. 36 For the Respondents Malathi Krishnan Messrs. Mal Krishnan & Co. Advocates & Solicitors No. 24, Jalan Kajang Jaya Taman Kajang Jaya 43000 Kajang Selangor Darul Ehsan.