IN HIGH COURT MALAYA, ALOR SETAR
KEDAH DARUL AMAN
CIVIL SUIT NO: 22-204-2001
BETWEEN
… PLAINTIFF
SHELL MALAYSIA TRADING SDN. BHD.
AND
… DEFENDANT
PESAKA SAUJANA DEVELOPMENT SDN. BHD.
IN COURT OF APPEAL MALAYSIA
CIVIL APPEAL NO. : K-02-860-04/2012
SHELL MALAYSIA TRADING SDN. BHD.
… APPELLANT
AND
PESAKA SAUJANA DEVELOPMENT SDN. BHD.
… RESPONDENT
WITH
CIVIL APPEAL NO. : K-02-910-04/2012
PESAKA SAUJANA DEVELOPMENT SDN. BHD.
… APPELLANT
AND
SHELL MALAYSIA TRADING SDN. BHD.
… RESPONDENT
1
GROUNDS OF JUDGMENT
ZAKIAH BINTI KASSIM, JC
[1]
The Plaintiff is claiming the refund of purchase price in the sum of
RM871,076.00 from the Defendant pursuant to a Sale and Purchase
Agreement for a piece of land. The Plaintiff contends that the condition
precedent under the said Sale and Purchase Agreement could not be
fulfilled and therefore the said agreement has become null and void.
[2]
On the 12.3.2012, I allowed the Plaintiff’s claim. Now the Defendant
appeals against the whole of the decision whilst the Plaintiff appeals on the
following grounds ;
a) Tuntutan Plaintif untuk faedah pada kadar 8% dari tarikh 4.11.1999
sehingga tarikh penjelasan penuh ditolak ; dan
b) Bahawa Defendan berhak untuk menyimpan apa-apa faedah yang
terakru untuk wang berjumlah RM871,076.00 yang dipegang
bersama oleh peguamcara Plaintif dan Defendan.
In order to avoid any confusion I will refer to Shell Malaysia Trading Sdn.
Bhd. as Plaintiff and Pesaka Saujana Development Sdn. Bhd. as
Defendant.
[3]
Background Facts
[3.1] The Defendant is the registered owner of a piece of land known
as P.T. No. 3918 Sungai Seluang (Taman Tiram), Mukim Sungai
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Seluang held under H.S.(M) No. 85/1993 (“the said land”).
The
Defendant entered into a Sale and Purchase Agreement dated
29.6.1996 with the Plaintiff wherein the Plaintiff agreed to purchase
the said land for the sum of RM871,076.00 for the purpose of building
and operating a petrol station (“the SPA”).
[3.2] Pursuant to Clause 2.1 in schedule 4 of the SPA, the Plaintiff
paid the full purchase price to the Defendant in the following manner;
a) The first payment of 10% of the purchase price amounting to
RM87,107.60 was paid to the Defendant on 27.8.1996; and
b) The balance purchase price or final payment of 90% amounting
to RM783,968.40 was paid to the Defendant’s solicitors,
Messrs. G.B. Neoh, Ng & Anuar as stakeholder whereby the
money shall only be released to the Defendant four (4) days
after the Memorandum of Transfer for the said land was
delivered to the Land Office for registration in favour of the
Plaintiff (as the purchaser).
[3.3] Clause D in Schedule 1 of the Preamble to the SPA states that
the agreement is conditional upon the Plaintiff (as the purchaser)
obtaining the approval of the Foreign Investment Committee (“FIC”)
and the State Authority for the purchase of the said land from the
Defendant (“the said approvals”).
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[3.4] Clause 1.3 in Schedule 2 of the SPA states that if the said
approvals are not obtained within 6 months from the date of the said
agreement, the SPA will become null and void and have no further
effect. Thereafter the Defendant has to refund to the Plaintiff all the
monies paid by the Plaintiff (Free of Interest).
[3.5] The Plaintiff could not obtain the FIC approval within 6 months
as stipulated under the SPA. However, after the Defendant granted
the Plaintiff a 3 months extension of time until 1.3.1997 to obtain the
said approvals, the Plaintiff obtained the FIC approval on 28.11.1996.
[3.6] Thereafter, the Defendant granted the Plaintiff a further
extension of time of 22 months from 2.3.1997 until 31.12.1998 for the
Plaintiff to obtain the approval from the State Authority to purchase
the said land.
[3.7] Subsequently, in a letter dated 15.9.1998, the “Pejabat
Pengarah Tanah dan Galian Negeri Kedah” representing the State
Authority informed the Plaintiff that the State Authority will not grant
permission to the Plaintiff to purchase the said land. Instead they
informed the Plaintiff that approvals are usually given to foreign oil
companies for possession of land for the petrol station site for a lease
of not more than 60 years.
[3.8] Therefore by way of a letter dated 25.11.1998, the Plaintiff’s
solicitors proposed to the Defendant’s solicitors for both parties to
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enter into a Rescission Agreement to rescind the SPA and to enter
into an Agreement to Lease the said land.
On 1.12.1998, the
Plaintiff’s solicitor sent draft copies of the Rescission Agreement and
the Agreement to Lease to the Defendant’s solicitors with the
condition that the said drafts is subject to amendments by the
Plaintiff.
[3.9] On 24.1.1999, the Defendant’s solicitors sent a letter marked
“subject to written contract” to the Plaintiff’s solicitor and said that the
Defendant is agreeable to the Rescission Agreement but wish to
make some amendments. The last paragraph of the said letter states
that until and unless the Rescission Agreement and Agreement to
Lease are executed by the Defendant, all the terms and conditions
shall not be binding on the Defendant.
[3.10] Subsequently on or around 21.5.1999, the Plaintiff’s solicitor
sent copies of the Rescission Agreement and Agreement to Lease to
be executed by the Defendant. On or around 10.6.1999 the Plaintiff’s
solicitors received from the Defendant’s solicitor’s copies of the
Rescission Agreement and Agreement to Lease which has been
executed by the Defendant.
[3.11] The Plaintiff subsequently changed its mind and decided not
to lease the said land from the Defendant.
On 4.11.1999, the
Plaintiff’s solicitor sent a letter to the Defendant’s solicitors “to rescind
the Agreement dated 29.6.1996 and any other agreement arising
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therefrom on the aforesaid grounds” on grounds of misrepresentation
by the Defendant.
In the said letter, the Plaintiff’s solicitors also
demanded the refund of 10% of the purchase price amounting to
RM87,107.60 from the Defendant.
[3.12] On 25.4.2000 the Plaintiff’s solicitors sent another letter to the
Defendant’s solicitors demanding the refund of the balance 90% of
the purchase price amounting to RM783,968.40 which was paid to
the Defendant’s solicitors. In the said letter, the Plaintiff’s solicitor
also mentioned the non-approval by the State Authority for the
Plaintiff to purchase the said land as a ground for rescinding the
agreement.
Issues To Be Tried
[4]
Both parties have signed an Issues To Be Tried dated 23.2.2012
(Enclosure F).
Paragraphs 5(a) and 5(b) of the said Issues has been
deleted by consent because it concerns the issue of misrepresentation
which the Plaintiff has abandoned. Therefore the Issues To Be Tried are
now as follows;
a) Whether the SPA dated 29.6.1996 between the Plaintiff and
Defendant is a conditional agreement which is inter alia, subject to;
i) The approval of the FIC and the State Authority for the Plaintiff
(as the purchaser) to purchase the Defendant’s land known as
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P.T. No. 3918 Sungai Seluang (Taman Tiram), Mukim Sungai
Seluang held under H.S.(M) No. 85/1993 (“the said land”) as
contended by the Plaintiff; or
ii) The approval of the FIC and the State Authority for the Plaintiff
to lease the said land as contended by the Defendant?
b) Whether the SPA became null and void when the Pejabat Tanah &
Galian Negeri Kedah informed the Plaintiff via a letter dated 15th
September 1998 that the State Authority will not grant permission to
the Plaintiff to purchase the said land and that approval will only be
granted for a lease of not more than 60 years?
c) Whether there is in existence the Rescission Agreement to terminate
the SPA and Agreement to Lease the said land which is valid and
binding upon both the Plaintiff and Defendant?
d) If the answer to paragraph (b) above is in the affirmative and positive,
whether the Plaintiff is still entitled to all the claims in this action which
includes the refund of the purchase price of the said land, general
damages, special damages, interest and costs?
e) Whether the Plaintiff’s solicitor Notice dated 4.11.1999 to rescind the
Sale and Purchase and any other agreement arising therefrom
between the Plaintiff and Defendant is valid?
7
Whether the SPA is conditional upon the approval of the FIC and the
State Authority for the Plaintiff to purchase the said land?
Finding of Facts After Full Trial
[5]
I shall consider the Issues To Be Tried No. (a) and (b) together as
they are inter-related. To prove its case against the Defendant, (PW1) Mr.
Choung Ee Yee one of the in-house legal counsel for the Plaintiff company
testified that the SPA is conditional on the approval of the FIC and the
State Authority for the Plaintiff to purchase the said land (see clause D in
Schedule 1 of the Preamble to the SPA). If the said approvals cannot be
obtained within 6 months from the date of the said agreement, the SPA will
become null and void. Encik Mohd Rizal bin Abdul Rahman, Penolong
Pengurus Besar of the Defendant company (SD1) when refered to page 4
of Bundle C agreed during cross-examination that these clauses are
binding on both parties.
[6]
According to PW1, after the Plaintiff and the Defendant signed the
SPA the Plaintiff paid the full purchase price pursuant to Clause 2.1 in
schedule 4 of the SPA to the Defendant in the following manner;
c) The first payment of 10% of the purchase price amounting to
RM87,107.60 was paid to the Defendant on 27.8.1996; and
d) The balance purchase price or final payment of 90% amounting to
RM783, 968.40 was paid to the Defendant’s solicitors, Messrs. G.B.
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Neoh, Ng & Anuar as stakeholder whereby the money shall only be
released to the Defendant four (4) days after the Memorandum of
Transfer for the said land was delivered to the Land Office for
registration in favour of the Plaintiff (as the purchaser).
[7]
PW1 explained further that Plaintiff obtained the approval from the
FIC on 28.11.1996 but however on 15.9.1998 the State Authority refused to
give the approval to the Plaintiff to purchase the said land. Instead they
informed the Plaintiff that all approvals are usually given to foreign oil
companies for possession of land for the petrol station site for a lease of
not more than 60 years. The actual paragraph 5 of the said letter reads ;
“Sungguhpun Kerajaan Negeri Kedah Darul Aman tidak mempunyai
polisi ataupun prosedur khusus, namun dalam semua kelulusan
kepada syarikat-syarikat minyak asing hanya diberikan pemilikan
tanah untuk tapak stesyen minyak secara pajakan tidak melebihi
selama 60 tahun”.
[8]
I am of the view that the SPA is conditional on the approval of the FIC
and State Authority. Since the State Authority refused to give the approval
to the Plaintiff to purchase the land, the SPA has become null and void on
15.9.1998.
The leading authority on point is the Privy Council case of
Aberfoyle Plantations Ltd. v. Khaw Bian Cheng [1959] 3 WLR 1011. In that
case, the Privy Council held at page 1016 ;
9
i) Where a conditional contract of sale fixes a date for the completion
of the sale, then the condition must be fulfilled by that date;
ii) Where a conditional contract of sale fixes no date for completion of
the sale, then the condition must be fulfilled within a reasonable
time; and
iii) Where a conditional contract of sale fixes (whether specifically or
by reference to the date fixed for completion) the date by which
the condition is to be fulfilled, then the date so fixed must be
strictly adhered to, and the time allowed is not to be extended by
reference to equitable principles.
[9]
On the facts in Aberfoyle, the Privy Council held at page 1013 that
where the agreement provided that ;
“the purchase is conditional on the vendor obtaining ... a renewal of
the seven leases ... so as to be in a position to transfer the same to
the purchaser ... and if for any cause whatsoever the vendor is
unable to fulfill this condition this agreement shall become null and
void and the vendor shall refund to the purchaser the deposit or
deposits already made". That condition remained unfulfilled and it
was held by the Privy Council that the purchaser was entitled to the
return of his deposits.”
10
[10] The case of Aberfoyle was approved in numerous cases including by
the Federal Court in National Land Finance Co-operative Society Ltd. v.
Sharidal Sdn. Bhd. [1983] 2 MLJ 211 and by the Supreme Court in the
case of Jaafar bin Ibrahim v. Gan Kim Kin [1985] 2 MLJ 24, 29, 30E-30I.
[11] In National Land Finance Co-operative Society Ltd. v. Sharidal Sdn.
Bhd. [1983] 2 MLJ 211 the respondents agreed to sell and the appellants
agreed to buy certain immovable properties, with the condition that the sale
shall be subject to the approval of the FIC. The FIC refused its approval.
The agreement was silent on the effect upon the agreement of nonapproval of the FIC but contained a proviso that “all monies paid by the
purchaser hereunder shall be returned to the purchaser in the event that
such approval as aforesaid is not given by the FIC.” The Federal Court
held that the effect of the non-approval was to render the agreement void.
Further performance of the agreement was understood between the parties
to be dependent or contingent upon the approval of the FIC. The effect of
such a contingent condition and as laid down by section 33(a) Contracts
Act 1950, is that a contract does not take effect unless and until the
condition is fulfilled and if it becomes impossible of performance, the
agreement becomes void in accordance with section 33(b), Contract Act
1950.
[12] In reaching its decision, the Federal Court in National Land Finance
Co-operative Society Ltd. v. Sharidal Sdn. Bhd. [1983] 2 MLJ 211 (supra)
held at page 218 ;
11
“It is therefore obvious that the parties have entered into a of sale
contingent upon the approval of the transaction by the FIC over which
the parties had no control. There was no promise, nor guarantee that
such approval would be given. Such a condition, in our judgment, is
more than a mere essential of the contract, a breach of which entitles
an innocent party to regard itself as discharged from further
performance and to sue for damages. It is, however, a condition
which is known in the law of contract as a contingent condition, the
effect of which is that contract shall not take effect unless and until
the condition is fulfilled. Until the FIC approval was given liability for
further
performance
remained
unenforceable,
i.e.
suspended
although neither the respondents nor the appellants could resile from
it until it could be definitely ascertained that the condition could not be
fulfilled.”
[13] In Jaafar bin Ibrahim (supra), the Supreme Court held that the said
agreement has become null and void on 31.12.1997 pursuant to Section
36(1) of the Contracts Act 1950 because the condition precedent was not
satisfied. Although the approval was subsequently obtained on 18.6.1980,
the court rejected the Plaintiff’s application for specific performance
because the agreement has already become void. The decision of the
Supreme Court was affirmed on appeal by the Privy Council in the reported
decision of Jaafar bin Ibrahim v. Gan Kim Kin [1987] 4 PCC 707, PC.
12
Whether the SPA is conditional upon the approval of the FIC and the
State Authority for the Plaintiff to lease the said land as contended by
the Defendant?
Clause D in Schedule 1 of the SPA states;
“This Agreement is conditional upon the Purchaser obtaining the
approvals of the Foreign Investment Committee (hereinafter referred
to as the “FIC”) and the State Authority in respect of the purchase of
the said land from the Vendor”.
In contrast, Clause 1.1 in Schedule 2 of the SPA states ;
“This agreement is conditional upon the Purchaser obtaining the
approval of the FIC and the State Authority in respect of the creation
of the Lease of the Demised Land in favour of the Purchaser
(hereinafter referred to as “ the Approvals”).
[14] After a careful perusal of these clauses I am of the view that there is
a conflict between the above clauses and that there is a mistake in one of
the clauses. In considering the SPA as a whole, it is clear that the approval
here refers to the approval to purchase the said land and that reference to
the creation of a lease is a typographical error for the following reasons;
a) The agreement itself is a SPA and not an Agreement to Lease. It is
not logical for the sale of a land to be subject to the approval of FIC
13
and the State Authority for the creation of a lease. In fact PW1, Mr.
Choung Ee Yee testified that it is impossible to apply or obtain
approval from the relevant authorities for a lease when the said
agreement is a sale and purchase agreement.
b) PW1 further contended that the Plaintiff’s actual application to the FIC
and the State Authority is to obtain approval to purchase the land and
not to lease the said land and this is within the full knowledge of the
Defendant.
c) The preamble to the draft Rescission Agreement and Agreement to
Lease were prepared because the State Authority was unable to give
approval for the purchase of the said land and was only prepared to
give approval for a lease. Encik Mohd Rizal (DW1) agreed during
cross-examination that the preambles do not make any reference to
the Plaintiffs failure to obtain approval from the FIC or the State
Authority for the creation of a lease on the land.
d) In this situation, looking at the language in both agreements, I am of
the view that both parties intended to sign the SPA of the said land
because the recital or the preamble to the SPA shows that the true
intention of the parties is to apply for approval from the FIC and the
State Authority to purchase the said land. This is in line with the
background of the agreement but clause 1.1 of Schedule 2 of the
SPA mistakenly refers to the approval from the FIC and the State
Authority for a lease.
14
Whether there is in existence the Rescission Agreement to terminate
the SPA to lease the said land which is valid and binding upon both
Plaintiff and Defendant?
[15] In the instant case, the Defendant did not file a Counterclaim to pray
for specific performance of any Agreement to Lease the said land.
Therefore in the absence of such a counterclaim, the court cannot exercise
its power to order specific performance of any agreement to lease in favour
of the Defendant. SPA has become null and void on 15.9.1998. Therefore
any act of the Plaintiff after the expiry period should not be taken to its
prejudice.
[16] In the present case, the Defendant’s agreement to the Agreement to
Lease is subject to a written contract because this condition was introduced
by the Defendant vide its letter dated 24.1.1999 which was marked with the
words “subject to written contract”.
[17] In my view, the words “subject to written contract” means that there is
no binding agreement in place until and unless a formal Agreement to
Lease is perfected i.e. executed by both parties.
[18] In the case of Low Kar Yit & Anor [1963] 29 MLJ 165, after the
“subject to a formal contract” provision was introduced, a final agreement
was reached between the solicitors for both parties.
The Plaintiff’s
solicitors returned the copies of the executed agreement to the Defendant’s
solicitor to be signed by the Defendant. Thereafter the Defendant refused
15
to sign the said agreement. The issue that arose is whether there was a
binding agreement between the Plaintiff and Defendant. Gill J in deciding
that there is no binding agreement in existence until the Defendant
executed the said agreement held,
“ In the light of the principles enunciated in the above cases in such
unmistakable language, which it will be presumptuous on my part
even to attempt to paraphrase and summarise, I am compelled to say
that I cannot see how it can be conceivably be argued that there ever
arose a legally binding contract between the parties to this action”.
[19] In the present case, only the Defendant signed the Agreement to
Lease. The Plaintiff did not sign the Agreement to Lease and therefore
there is no binding agreement. It is my view that even though both parties
have agreed to the terms of the Agreement, this is not sufficient to create a
binding agreement.
[20] I certainly cannot agree with the submission by the learned counsel of
the Defendant that since both parties have agreed to sign the Agreement to
Lease there is a binding agreement in existence. In my view the principle
in the case of Carlill v Carbolic Smoke Ball & Co [1893] 1QB 256 as
submitted by the Defendant’s learned counsel is not applicable in the
instant case.
16
[21] Instead I am of the view that since the Plaintiff did not sign the
Agreement to Lease, there is no binding agreement in existence.
Therefore the Plaintiff is entitled at any point of time to withdraw from
entering into the Agreement to Lease.
If there is in existence the Rescission Agreement to terminate the sale
and Purchase Agreement and the Agreement to Lease the said land
which is valid and binding, whether the Plaintiff is still entitled to all
claims in this action which includes the refund of the purchase price
of the said land, general damages, special damages, interest and
costs?
[22] In the absence of any evidence that the Rescission Agreement and
Agreement to Lease were executed by both parties, I conclude that there is
no valid and binding Rescission Agreement and Agreement to Lease and
thus the Plaintiff is entitled to a full refund of the purchase price.
Payment of Interest.
[23] Clause 1.3 in schedule 2 of the SPA states that if the said approvals
are not obtained within 6 months from the date of the said Agreement, the
Defendant has to refund to the Plaintiff all the monies paid by the Plaintiff to
the Defendant free of interest.
17
[24] On this issue, the learned counsel for the Plaintiff submitted that the
Defendant failed to refund the purchase price to the Plaintiff for about 12
years since the Plaintiff’s solicitor’s letter dated 25.4.2000. Therefore the
court should award interest in favour of the Plaintiff. The Plaintiff’s claim for
interest is a consequence of the said delay and the law allows the claim for
interest in such circumstances. In Wong Chong Chow v Pan-Malaysian
Cement Works Bhd. [1980] 2 MLJ, the Federal Court accepted the principle
that interest was awarded to the Plaintiff “for being kept out the money
which ought to have been paid to him”.
To support his argument, the
learned counsel also referred to section 11 of the Civil Law Act which
provides that;
“11. Power of Courts to award interest on debts and damages.
In any proceedings tried in any Court for the recovery of any debt or
damages, the Court may, if it thinks fit, order that there shall be
included in the sum for which judgment is given interest at such rate
as it thinks fit on the whole or any part of the debt or damages for the
whole or any part of the period between the date when the cause of
action arose and the date of the judgment:
Provided that nothing in this section –
(a) shall authorise the giving of interest upon interest;
(b) shall apply in relation to any debt upon which interest
is payable as of right whether by virtue of any agreement
or otherwise; or
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(c) shall affect the damages recoverable for the dishonour
of a bill of exchange.”
Finding of Court
[25] Having considered the argument of both learned counsels of both
sides and authorities cited by them, I am satisfied that the Plaintiff has
proved his case on the balance of probabilities. I, therefore, allowed the
Plaintiff’s claim of RM871,076.00.
[26] On the claim of interest, clause 1.3 of the SPA provides that ;
“In the event that the Approvals is not granted by the relevant
authorities within six (6) months from the date of this Agreement, this
Agreement shall be null and void and have no further effect and
thereafter the vendor shall refund forthwith all money (Free of
Interest) paid by the Purchaser to the Vendor and thereafter neither
party shall have any claims against one another”.
[27] I am of the view that the above clause 1.3 of the SPA is a specific
provision which was agreed by both parties when they signed the
agreement. Therefore it prevails over the general provision under section
11 of Civil Law Act. I certainly do not agree with the Plaintiff’s submission
that despite the above clause 1.3 of the SPA, the Plaintiff is still entitled to
interest because the Defendant failed to refund the purchase price to the
Plaintiff for about 12 years since the Plaintiff’s solicitor’s letter dated
19
25.4.2000.
On that basis the Plaintiff further submitted that the court
should award interest in favour of the Plaintiff as the Plaintiff’s claim for
interest is consequence of the said delay and the law allows the claim for
interest in such circumstances.
[28] To support his arguments, learned counsel for Plaintiff referred to
case Wong Cheng Chew v. Pan-Malaysia Cement Works Bhd. [1980] 2
MLJ 75, 78 where the Federal Court awarded interest to the Plaintiff “for
being kept out of the money which ought to have been paid to him”.
[29] Having perused the fact of the case Wong Cheng Chew v. PanMalaysia Cement Works Bhd. [1980] 2 MLJ 75, 78 there is no specific
clause as per clause 1.3 of SPA in the instant case. On that basis, I am of
the view that the principle in the case Wong Cheng Chew v. Pan-Malaysia
Cement Works Bhd. [1980] 2 MLJ 75, 78 doesn’t apply in the instant case.
I am also of the view that under section 11 of the Civil Law Act, it is at the
discretion of the court to award interest.
[30] On the above premises, I therefore, dismissed the interest claimed by
the Plaintiff.
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[31] Having regard to the issues raised for consideration, the number of
witnesses called as well as the length of trial, I awarded costs of
RM15,000.00 to the Plaintiff.
t.t.
ZAKIAH BINTI KASSIM
JUDICIAL COMMISSIONER
HIGH COURT OF MALAYA
ALOR SETAR
30 JUNE 2012
21
Counsels :
Plaintiff
H.L. Wong
Messrs Azman Davidson & Co.
Suite 13.03, 13th Floor
Menara Tan & Tan
207 Jalan Tun Razak
50400 Kuala Lumpur
Defendant
C.C. Chang
Messrs Syarikat Ng & Anuar
Jalan Pengkalan
Taman Pekan Baru
08000 Sg. Petani
Kedah Darul Aman
22