DIDALAM MAHKAMAH TINGGI MALAYA DI JOHOR BAHRU
DI DALAM NEGERI JOHOR DARUL TAKZIM
GUAMAN SIVIL NO. (MT-1) 22-344-2003
ANTARA
ZULKEPLI BIN MOHAMAD ZAIN & ASNAH BIN MIJAN & 52 LAGI
PLAINTIF-PLAINTIF
DAN
BCM DEVELOPMENT SDN. BHD.
DEFENDAN
DI DALAM MAHKAMAH TERBUKA
DI HADAPAN Y.A. TUAN VERNON ONG
HAKIM
GROUNDS OF JUDGMENT
The plaintiffs’ claim is for the refund of monies paid to the defendant
under fifty-three sets of sale and purchase agreements and damages for
breach of contract.
Brief account of the facts
Pursuant to a Development Rights Agreement entered into between
the defendant and The Titular Roman Catholic Bishop of Malacca Johor
(‘the proprietor’), the defendant was given the right to develop a parcel of
land belonging to the proprietor into a housing project to be known as
Taman Mewah Jaya, Johor Bahru. Between July 2000 and January 2001
the defendant and the proprietor entered into fifty-three sets of individual
sale and purchase agreements with each of the fifty-three plaintiffs in this
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action. In the sale and purchase agreements the defendant with the
consent of the proprietor agreed to sell to each of the plaintiffs a plot of land
together with a double-storey terrace house upon the terms and conditions
therein contained. It is not disputed that pursuant to the sale and purchase
agreements each of the plaintiffs paid to the defendant the sums as
stipulated in paragraph 4 of the statement of claim.
Under the sale and purchase agreements the defendant agreed to
complete and hand over vacant possession of the double-storey terrace
houses to the plaintiffs within 24 calendar months from the date of the sale
and purchase agreement; which completion and handing over fell within
July 2002 and January 2003. Meanwhile, on 16.1.2002 the proprietor
terminated the defendant’s right to develop the land. The land was
returned to the proprietor on 18.2.2002. The proprietor then appointed
Kong Sun Construction Sdn Bhd (‘Kong Sun’) to take over and continue
with the development of the project.
Subsequently, Kong Sun entered into sale and purchase agreements
with some of the plaintiffs. The monies paid by the plaintiffs to the
defendant under the original sale and purchase agreements were credited
as part-payment towards the purchase price under the new sale and
purchase agreements.
Plaintiffs’ case
The plaintiffs’ case is the defendant abandoned the housing project
and failed to complete and deliver vacant possession of the housing units.
The plaintiffs terminated the sale and purchase agreements and are
claiming for the refund of the monies paid to the defendant totalling
RM4,152,286.35 together with general damages for breach of contract.
Defendant’s defence
The sale and purchase agreements were tripartite agreements
entered into between the plaintiffs as purchasers, the defendant as
developer, and the proprietor as the landowner. The defendant did not
commit any breach of the sale and purchase agreements. The defendant
handed back over possession of the land together with structures and
buildings erected thereon to the proprietor on 18.2.2002 pursuant to the
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termination of the Development Rights Agreement by the proprietor on
16.1.2002.
It is also contended that the defendant has been discharged of its
obligations and liabilities to the plaintiffs as the plaintiff have entered into
new sale and purchase agreements with Kong Sun for which the plaintiffs
have also been given credit for the monies paid under the original sale and
purchase agreements.
The defendant did not receive any benefit from the sale and purchase
agreements as the monies paid by the plaintiff to the defendant were
placed in a project account and applied towards construction of the
buildings.
Alternatively, the alleged breach is not fundamental entitling the
plaintiffs to terminate the sale and purchase agreements because (i) there
is provision for late delivery charges and (ii) there was substantial
performance by the defendant. Further, the plaintiffs’ action is premature
as there was no proper termination of the sale and purchase agreements.
The facts as disclosed in the evidence
It was agreed between counsel for the plaintiffs and the defendant
that the evidence of the 24th plaintiff Mdm Chew Bee Lee (PW1) shall be
made for and on behalf of all the plaintiffs in this action. PW1’s testified
that she paid the defendant RM64,372.00 and that she incurred legal fees
for the transfer of the property. Under cross-examination PW1 said that
she entered into a new sale and purchase agreement with Kong Sun. The
purchase price of the housing unit under the new sale and purchase
agreement is the same as that under the original sale and purchase
agreement. Kong Sun also credited the RM64,372.00 paid by PW1 to the
defendant as having being paid under the new sale and purchase
agreement. PW1 agreed that she only gave notice of termination to the
defendant; and that she did not give any notice to the proprietor.
Mr. Wong Chin Vew (DW1) a former director of the defendant
company testified that save and except for a demand letter from the 38th
defendant, he was not aware of any notice of termination received by the
defendant. DW1 said that the defendant surrendered possession of the
project site on 18.2.2002 after the Development Rights Agreement was
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terminated by the proprietor. The proprietor subsequently appointed Kong
Sun to take over the project. According to DW1 the plaintiffs had entered
into fresh sale and purchase agreements with Kong Sun in respect of the
same housing units and that the amounts paid to the defendant under the
original sale and purchase agreements had been credited or set-off against
the purchase price in the fresh sale and purchase agreements with Kong
Sun.
Issues for determination
In the light of a undisputed facts and the defendant’s defence as
pleaded, counsel for the plaintiffs and the defendant agreed that the
following issues to be tried are as follows:
(1)
(2)
(3)
Whether the defendant has been discharged of its obligations
and liabilities under the original sale and purchase agreements
entered into between the plaintiffs and the defendant?
If not, whether the defendant is in breach of the sale and
purchase agreements?
Whether the termination of the sale and purchase agreements
by the plaintiffs is lawful? If so, whether the plaintiffs are
entitled to the refund of the monies paid under the sale and
purchase agreements and damages for breach of contract.
Findings of the Court
(1) Whether the defendant has been discharged of its obligations and
liabilities under the original sale and purchase agreements entered
into between the plaintiffs and the defendant?
Learned counsel for the defendant submitted that it had become
impossible for the defendant to continue with the housing project and
complete the building of the double-storey terrace houses because (i) the
Development Rights Agreement had been terminated on 16.1.2002 , and
(ii) the project site had been returned to the proprietor on 18.2.2002, which
events took place well before the completion dates under the respective
sale and purchase agreements. Accordingly, it was submitted that since
the performance of the sale and purchase agreements have been
frustrated, the defendant is discharged of its obligations. The plaintiffs
acquiesced to the proprietor taking back the project site when the plaintiffs
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refrained from seeking redress (Tan Ah Chim & Sons Sdn Bhd v Ooi Bee
Tat & Anor [1993] 3 MLJ 633). Further the plaintiffs are estopped from
denying that they have agreed to the performance of the obligation to
complete and hand over their houses by the proprietor in lieu of the
defendant (s 42 Contracts Act 1950).
Learned counsel for the plaintiffs submitted that the defendant was
contractually bound under clause 20 of the sale and purchase agreements
to hand over vacant possession of the housing units to the plaintiffs within
24 calendar months from the date of the sale and purchase agreements. It
is also stipulated in clause 7 that time shall be of the essence of the
contract (Syarikat Chang Cheng (M) Sdn Bhd v Pembangunan Orkid Desa
Sdn Bhd [1996] 1 MLJ 800; Xavier Kang Yoon Mook v Insun Development
Sdn Bhd [1995] 2 CLJ 471). The plaintiffs have performed their obligations
under the sale and purchase agreements by paying the purchase price
upon receipt of the architects’ certificates. The defendant were never
discharged and released from their obligations and liabilities under the sale
and purchase agreements.
In law the defendant’s obligations under the sale and purchase
agreements are separate and distinct from that under the Development
Rights Agreement. The agreements in question are different, separate and
distinct. The Development Rights Agreement is between the defendant
and the proprietor. The plaintiffs are not privy to this agreement. The fact
that the defendant and the proprietor are parties to the sale and purchase
agreements does not necessarily give rise to a nexus between the sale and
purchase agreements and the Development Rights Agreement. The
agreements are distinct and independent of each other. In other words, the
rights of the plaintiffs qua purchasers under the SPAs are not affected by
the Development Rights Agreement. The plaintiffs’ rights under the sale
and purchase agreements cannot be diluted in the manner suggested by
the defendant to the extent that the defendant is released of its obligations
under the sale and purchase agreements as the Development Rights
Agreement has been terminated. It follows that unless and until the
defendant has been released or discharged by the plaintiffs, the
defendant’s obligations and liabilities under the sale and purchase
agreements subsist; the defendant remains liable on its obligations and
liabilities. The defendant also argues that since some of the plaintiffs have
entered into new sale and purchase agreements with Kong Sun, the
defendant must have been released and discharged of its obligations under
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the original sale and purchase agreements. This contention is
misconceived as the entering into a new sale and purchase agreement
does not of itself discharge the defendant unless there is an express
stipulation to this effect; on this point there is no evidence to show that the
defendant was released or discharged of its obligations. By reason of the
foregoing the question is answered in the negative.
(2) If not, whether the defendant is in breach of the sale and purchase
agreements?
Learned counsel for the defendant submitted that the alleged breach
was caused by the proprietor when it terminated the Development Rights
Agreement and took back possession of the project site (Foong Seong
Equipment Sdn Bhd v Keris Properties (PK) Sdn Bhd (Court of Appeal Civil
Appeal No. A-02(IM)-876-08; Tan Ah Chim & Sons, supra).
In reply learned counsel for the plaintiffs submitted that time is of the
essence of the sale and purchase agreements. Further the defendant
failed to complete and deliver vacant possession of the housing units in
breach of the express stipulation. As the defendant has failed to perform
its primary obligation aforesaid, the plaintiffs have been deprived of
substantially the whole benefit from the contract. This failure amounted to a
fundamental breach of the contract whereby the plaintiffs were entitled to
terminate the contract (Sim Chio Huat v Wong Ted Fui [1983] 1 MLJ 151;
Chye Fook & ANor v Teh Teng Seng Realty Sdn Bhd [1989] 1 MLJ 311;
Xavier Kang Yoon Mook v Insun Development Sdn Bhd [1995] 2 CLJ 471;
Tan Yang Long v Newacres Sdn Bhd [1992] 1 MLJ; Syarikat Chang Cheng
(M) Sdn Bhd v Pembangunan Orkid Desa Sdn Bhd [1996] 1 MLJ 800).
The defendant’s reasons for not being able to continue with the housing
project is unreasonable and does not amount to frustration (Pembinaan
LCL Sdn Bhd v SK Styrofoam (M) Sdn Bhd [2007] 4 MLJ 22).
Finding that the sale and purchase agreements and the Development
Rights Agreement are distinct and separate agreements, it follows that the
termination of the Development Rights Agreement does not impact on the
defendant’s obligations under the sale and purchase agreements. The
defendant has a primary obligation to complete and deliver the housing
units to the plaintiffs. In this regard the defendant has clearly failed to
perform its obligations. Instead, it appears that the defendant acceded to
the proprietor’s termination of the Development Rights Agreement. Even if
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the plaintiffs have entered into fresh sale and purchase agreements with
Kong Sun for the purchase of the same housing units, the defendant’s
liabilities under the original sale and purchase agreements subsists. The
original sale and purchase agreements were not substituted with the fresh
sale and purchase agreements. As it is not disputed that the defendant
failed to complete and deliver the housing units to the plaintiffs it must
follow that defendant is in breach of the sale and purchase agreements.
(3) Whether the termination of the sale and purchase agreements by the
plaintiffs is lawful?
Learned counsel for the defendant submitted that as the sale and
purchase agreements are tripartite agreements the notices of termination
must be given to both the defendant and the proprietor in order for the
termination to be proper (ss 6(a), 67 & 76 Contracts Act 1950; ArabMalaysian Finance Bhd v Borneo Wood (Sabah) Sdn Bhd [2008] 7 MLJ
834). The intended termination must also be accepted by all the parties
concerned failing which it is necessary to obtain a court declaration to that
effect (Foong Seong Equipment Sdn Bhd, supra). Only the 38th plaintiff
issued a notice of demand dated 7.2.2003 to the defendant. No notice of
termination was served on the defendant after the notice of demand. No
notice of termination was given to the proprietor. It was also contended
that as the sale and purchase agreements contained a provision for late
delivery damages, the plaintiff are not at liberty to terminate the
agreements (Berjaya Times Square Sdn Bhd v M Concept Sdn Bhd [2010]
2 AMR 205 (FC)).
There are three parties to the sale and purchase agreements – the
defendant of the first part, the purchaser of the second part and the
proprietor of the third part. The proprietor granted to the defendant the
absolute right to develop the land as a housing development and to sell the
land. The defendant agreed to sell the housing units to the plaintiffs. The
question is whether notice of termination must be given to the defendant
and the proprietor in order for the termination to be valid and effective. The
completion and delivery of the housing units to the plaintiff is an integral
and fundamental obligation of this agreement. It is clear that the housing
units cannot be handed over to the plaintiffs without the land on which the
housing units are built. In the premises it follows that both the defendant
and the proprietor share the primary obligation under the agreement.
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In the plaintiffs’ bundle of documents it appears that some but not all
of the plaintiffs issued notices of termination to the defendant. PW1 in her
evidence did not allude to any notice of termination at all though under
cross-examination she said that a notice of termination was issued to the
defendant only. PW1 also admitted that she did not know if the other
plaintiffs sent notices of termination to the defendant and the proprietor.
Even if the Court accepts that all the plaintiffs did give notice of termination
to the defendant, the question is whether such notice of termination is valid
and proper. Having found that the completion and delivery of the housing
units to the plaintiff is an integral and fundamental obligation of this
agreement shared jointly and severally by the defendant and the proprietor
the Court is of the view that notice of termination must be given to both the
defendant and the proprietor. The sale and purchase agreements are
tripartite agreements. Each of the parties have entered into a contractual
relationship binding them to the terms and conditions in the agreement. In
the event that any one party intends to terminate the agreement, notice of
termination must be given to the two other parties; it will not suffice for
notice to be given to one party alone. The giving of notice to one party
alone renders the notice defective and incompetent (ss 6(a), 67 & 76
Contracts Act 1950). For the foregoing reasons the termination of the sale
and purchase agreements by the plaintiffs is not lawful.
By reason of the reasons adumbrated above, the plaintiffs’ claims are
dismissed with costs of RM10,000.00.
(VERNON ONG)
JUDGE
HIGH COURT MALAYA
JOHOR BAHRU
DATED:
21ST SEPTEMBER 2010
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COUNSEL
Diana Ann Seah – Tetuan Diana Seah & Co., No. 51-02, 2nd Floor, Jalan Tun Abdul Razak,
Susur 1/1, 80000 Johor Bahru - for Plaintiff.
Chen Wai Jiun - Tetuan W.J. Chen & Co., Suite 6.2, Level 6, Menara Pelangi, Jalan Kuning,
Taman Pelangi, 80400 Johor Bahru - for Defendant.
VO – nk-22-344-2003/mj
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