DI DALAM MAHKAMAH TINGGI MALAYA DI JOHOR BAHRU
DI DALAM NEGERI JOHOR DARUL TAKZIM
GUAMAN SIVIL NO. (MT-1) 22-222-2002
ANTARA
MELATRANS SDN. BHD
…PLAINTIF
DAN
LIM TIAN HUAT
…DEFENDAN
DAN
CARAH ENTERPRISE SDN BHD
...PIHAK KETIGA
DI DALAM MAHKAMAH TERBUKA
DI HADAPAN Y.A. VERNON ONG
HAKIM
GROUNDS OF JUDGMENT
Pursuant to a sale and purchase agreement Melatrans Sdn Bhd (the
plaintiff) paid the sum of RM675,000.00 by way of deposit and part
payment of the purchase price. The sale and purchase agreement was
subsequently aborted and the plaintiff is claiming for the refund of the said
sum.
Brief account of the facts
Carah Enterprise Sdn Bhd (the 3rd party) is the registered proprietor
of a lease on a piece of land (‘the Lease’). Pursuant to a debenture created
by the 3rd Party, Perdana Merchant Bankers appointed Lim Tian Huat (the
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defendant) as the receiver and manager (‘R&M’) of the 3rd Party on
9.2.1994.
On 2.7.1996, the defendant acting as the R&M of the 3rd Party
entered into a sale and purchase agreement (‘the SPA’) with the plaintiff,
for the sale of the Lease to the Plaintiff at the purchase price of
RM6,750,000.00. The SPA was executed by the defendant in his capacity
as the receiver of the 3rd Party in receivership (‘the Vendor’). Pursuant to
the SPA, the plaintiff paid to the Vendor the sum of RM675,000.00 (‘the
Deposit’) as deposit and part-payment of the purchase price. It is expressly
stipulated in the SPA that in the event that the Vendor is prevented or is
unable for any reason or due to any circumstances whatsoever beyond its
control but not due to the fault of default of the plaintiff (‘the Intervening
Event’) to proceed and carry into effect the sale and the transfer of the
lease in favour of the plaintiff, the Vendor shall take or cause all necessary
steps and action to be taken to remove the Intervening Event or remedy
such disability within 90 days from the date on which the 3rd Party (in
receivership) has received notice of the Intervening Event.
On or about 18.6.1997, the Vendor received notice of an Intervening
Event as a result of which the completion date of the transaction was
deferred to 21.7.1997. It arose as a result of the Federal Court decision in
Kimlin Housing Development Sdn Bhd v Bank Bumiputra Malaysia Berhad
& Ors [1997] 3 CLJ 274. In Kimlin, supra one of the primary issues to be
determined was whether the receivers and managers under a debenture
were entitled to sell the charged lands without taking proceedings under the
National Land Code to obtain a judicial sale. The Federal Court held that
the receivers and managers were not entitled to do so as the provisions of
ss. 254 to 265 of the National Land Code are designed to protect the
chargor and they cannot be waived contractually out by him. As the rights
and remedies of parties under a statutory charge over land are exhaustive
and exclusive, any attempt at contracting out of those rights, unless
expressly provided for in the National Land Code, would be void as being
contrary to public policy.
In this case, the Lease was charged under the National Land Code.
Consequently, the defendant applied to the High Court at Kuala Lumpur
and obtained a declaration on 20.9.1997 that he had the requisite powers
to sell the lease (‘the Carah Decision’) The Vendor’s solicitors then wrote
to the plaintiff’s solicitors on 24.9.1997 informing that the Intervening Event
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had been removed and demanded for the payment of the balance
purchase price. In the meantime, an appeal was lodged against the
decision of the High Court. The High Court decision was affirmed by the
Court of Appeal on 26.1.1999 and by the Federal Court on 13.3.2003.
Meanwhile, on 10.10.1997 the plaintiff’s solicitors wrote to the Vendor’s
solicitors terminating the sale and purchase agreement.
As the matter was unresolved, the plaintiff filed this action on
15.4.2002. Pending the trial of this action, the defendant’s appointment as
the R&M of the 3rd Party was declared invalid or otherwise null and void by
the Federal Court in Abdul Rahim Abdul Hamid & Ors v Perdana Merchant
Bankers Bhd & Ors [2006] 3 CLJ 1 on 7.4.2006. The Federal Court also
ordered that all funds, assets and undertakings received, taken or utilised
by the defendant in the exercise of his powers as a R&M be refunded
forthwith to the 3rd Party (‘the Perdana Merchant Decision’). Following the
Perdana Merchant Decision, the solicitors for the defendant entered into a
settlement agreement with the 3rd Party on 15.5.2006.
On 8.6.2009, the Writ was amended to substitute the 3rd party (then
sued as ‘CARAH ENTERPRISE SDN BHD (Dalam Penerimaan)’) with the
defendant. .
Plaintiff’s claim
The plaintiff’s claim is predicated upon the following premises:
(i)
(ii)
the plaintiff did not breach the terms of the SPA, and therefore
the Deposit should not have been forfeited; and
consequent upon the Perdana Merchant Decision, the
defendant did not have the authority to enter into the SPA; the
SPA is void and the plaintiff is entitled to restitution under ss 65
& 66 of the Contracts Act 1950.
Defendant’s case
The defendant took the position that:
(i)
the SPA makes it clear that the defendant is not liable under
any circumstances;
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(ii)
(iii)
(iv)
(v)
the plaintiff breached the terms of the sale and purchase
agreement with the consequence that the Deposit was properly
forfeited;
the Deposit was received by and used for the benefit of the 3rd
Party;
the Carah Decision, which involved all the parties hereto,
makes clear that the defendant was duly authorised to sell the
Lease; and
the claim is time-barred.
The defendant’s claim against the 3rd Party is for an indemnity should
the defendant be found liable to refund the Deposit to the plaintiff under ss
70 & 71 of the Contracts Act 1950.
3rd Party’s defence
The sale of the Lease was illegal as the defendant failed to obtain
ratification from the board of directors of the 3rd party. The defendant was
at all material times the agent of the debenture holders; as such, the
debenture holders are liable to indemnify the defendant for the Deposit.
Findings of the Court
At the trial of this action, each of the parties called one witness – Mr.
Ling Cheng Fah (PW1), Mr. Lim Tian Huat (DW1) and En. Hassan Bin Abd
Hamid (TPW1). In the light of the issues as pleaded, the principal issues to
be determined are as follows:
(a)
(b)
(c)
(d)
Whether the claim is time barred?
Whether, in the light of the Perdana Merchant Decision the SPA
is a valid and enforceable contract?
If the SPA is a valid and enforceable contract, whether the
plaintiff committed any breach of the terms of the SPA?
If the SPA is not a valid and enforceable contract, whether the
defendant is bound to make restitution of the Deposit to the
plaintiff?
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Whether the claim is time barred?
In law, the point in time where all the material facts are said to be in
existence determines when the cause of action is complete. Therefore, a
cause of action is said to have accrued when there is in existence a person
who can sue and another who can be sued and when all the facts have
happened which are material to be proved to entitle the plaintiff to succeed.
Thus, a plaintiff’s cause of action must be complete prior to the issuance of
the Writ (Lim Kean v Choo Koon [1970] 1 MLJ 158; Credit Corporation (M)
Bhd v. Fong Tak Sin [1991] 1 CLJ 69 (Rep); [1991] 2 CLJ 871; [1991] 1
MLJ 413).
The defendant’s contention that the plaintiff’s claim is time-barred is
premised on 2 grounds. Firstly, it is contended that the cause of action
based on the SPA accrued when the Deposit was forfeited on or about
25.9.1997 or latest by 9.1.1998. The Writ was only amended to substitute
the defendant as a party in place of the 3rd party on 8.6.2009. Time stops
running against the defendant only on the date when the defendant is
made a party (i.e. on 8.6.2009) by which time limitation had set in (s 6(1)
Limitation Act 1953;Suruhanjaya Pelabuhan Pulau Pinang v Boss s/o
Ramasamy [2000] 4 MLJ 153 (CA)). Secondly, as the plaintiff’s claim is for
restitution, the cause of action arose on the date of the sale and purchase
agreement, i.e. 2.7.1996 (s 66 Contracts Act 1950; Hansraj Gupra & Ors v
Official Liquidators of the Dehra Dun-Mussoorie Electric Tramway
Company, Limited (1932) Vol. LXI.A.13).
The defendant’s first ground is that the cause of action accrued when
the Deposit was forfeited on or about 25.9.1977 or latest by 9.1.1998.
Being an action founded on a contract, the action must be brought within a
period of 6 years from the date the cause of action accrued (s 6(1)
Limitation Act 1953). On that premise, the expiry of the 6 year limitation
period falls on 8.1.2004. As the defendant was only substituted as a party
on 8.6.2009, does it follow that as at that date limitation had already set in
so as to extinguish the cause of action against the defendant. In
Suruhanjaya Pelabuhan Pulau Pinang, supra the plaintiff commenced an
action seeking a declaration that his retirement was unlawful. He named
Suruhanjaya Pelabuhan Pulau Pinang (the appellant) as the 1st defendant
and the Government of Malaysia as the 2nd defendant. Subsequent to that,
the plaintiff applied to substitute the appellant with Penang Port Sdn Bhd as
the 1st defendant. As a result, Penang Port Sdn Bhd became the 1st
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defendant in place of the appellant who then ceased to be a party in the
action. However, sometime in 1996, the plaintiff applied to bring back the
appellant as a defendant by way of reinstatement instead of adding as a
defendant. The effect of this application was to substitute the appellant as
the 1st defendant in place of Penang Port Sdn Bhd and to rename the
existing 1st defendant as the 3rd defendant. The appellant appealed against
the High Court order allowing the plaintiff’s application. On appeal, the
Court of Appeal set aside the High Court order. At p 165, the Court of
Appeal said:
As can be seen the cause of action commenced on 30 March 1983 when the
plaintiff received the letter from the appellant informing him that he had been
retired. The present application was made on 13 February 1996 some
thirteen years later and by then limitation had set in. As such the defence of
limitation is clearly available to the appellant and they could not be deprived
of it. It is a right which is not to be taken away as stated by the Privy Council
in Yew Bon Tew & Anor v Kenderaan Bas Mara [1983] 1 MLJ 1.
In the present case, on 8.6.2009 being the date the defendant was
substituted as a party, limitation had already set in by more than 9 years.
Applying the aforesaid principles to the facts of this case, the defence of
limitation is clearly available to the defendant. Accordingly, by the time the
defendant was substituted as a party the cause of action against the
defendant was already extinct. It cannot be gainsaid that the defence of
limitation is a right which cannot be taken away. As the defence of
limitation has been raised by the defendant, the plaintiff bears the
obligation of pleading and proving that the action was brought within the
limitation period (Ong Ah Bee v Hii Chung Siong, Robin [1993] 1 CLJ 504).
It is pertinent to observe that the plaintiff did not file a Reply. As the plaintiff
did not reply to the defendant’s defence of limitation, the only conclusion
that the Court can draw is that the plaintiff has failed to discharge the
burden of pleading and proving that the plaintiff’s claim based on the SPA
was brought within the limitation period.
The defendant’s second ground is that since the plaintiff’s claim is for
restitution the cause of action commenced when the SPA was made (s 65
of the Contracts Act 1950; Hansraj Gupra & Ors, supra). As such the
action against the defendant ought to have been instituted by 1.7.2002,
being a period of 6 years from the date of the SPA. Since the defendant
was only substituted as a party on 8.6.2009, it follows that the plaintiff’s
claim for restitution is also out of time. Learned counsel for the defendant
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also argued that even if the Perdana Merchant Decision is a special
circumstance, then the cause of action accrued on 7.4.2006, the date of
that decision. If so, then this claim would be premature since it was filed in
2002.
Special circumstances are circumstances which are out of the
ordinary. They are not circumstances which are common, usual or within
the contemplation of the parties to the contract. Special circumstances are
events or happenings which are extraordinary, unexpected, unanticipated,
unforeseen or unusual.
What are the pertinent background facts? In this case the defendant
was appointed as R&M on 9.2.1994. The SPA was executed on 2.7.1996.
On 20.9.1997 the defendant obtained the Carah Decision declaring that he
has the power to enter into the sale and purchase agreement for the sale of
the Lease. The High Court order was affirmed by the Court of Appeal on
26.1.1999 and the Federal Court on 13.3.2003. In the meantime, however,
the plaintiff had already terminated the SPA on 10.10.1997 and filed the
present action on 15.4.2002. Pending the trial of this action, the Perdana
Merchant Decision was made on 7.4.2006. The Carah Decision affirming
the powers of the defendant to enter into the sale and purchase agreement
appears to be at variance with the Perdana Merchant Decision which held
his appointment as R&M invalid. In the light of the Carah Decision and
pending the trial of this action, the Perdana Merchant Decision must have
come as a lightning bolt to the parties. On these facts, the Court is driven
to the conclusion that there were special circumstances. As these special
circumstances are pleaded in para. 21 of the amended Statement of Claim,
the defendant’s contention is without merit. Accordingly, the Court finds
that the plaintiff’s claim for restitution is not time-barred.
For the foregoing reasons, the plaintiff’s claim in contract is timebarred. However, as the plaintiff’s claim for restitution is not time-barred,
the Court will now consider the validity of the SPA.
(b) Whether, in the light of the Perdana Merchant Decision the SPA is a
valid and enforceable contract?
Learned counsel for the plaintiff argued that since the defendant’s
appointment as the R&M of the 3rd Party is “invalid or otherwise null and
void”, the defendant had no authority whatsoever to enter into the SPA and
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or to forfeit the Deposit (Black’s Law Dictionary (7th Edn); Words, Phrases
& Maxims Legally & Judicially Defined, Anandan Krishnan Vol. 14;
Kalawani v Vishweshar AIR 1958 SC 216). All monies received in
receivership is treated as monies received by the defendant and not as
agent of the 3rd Party. As the SPA has become void, the defendant is
bound to restore the Deposit to the plaintiff (ss 65 & 66 Contracts Act 1950;
Ted Bates (M) Sdn Bhd v Balbir Singh Jholl [1979] 2 MLJ 257 (FC); Loke
Yuen Cheng & Anor v Vimtex Sdn Bhd [1998] 4 MLJ 169 (CA)).
Learned counsel for the defendant disputed the plaintiff’s claim on 3
grounds. Firstly, the defendant had the authority to enter into the sale and
purchase agreement. The defendant’s authority was confirmed by the
Carah Decision. As the Carah Decision is an order of the High Court which
was affirmed by the Court of Appeal and the Federal Court, it is binding on
the Court. The SPA is not void and s 66 of the Contracts Act 1950 does
not apply. Secondly, the plaintiff’s claim is a tactical manoeuvre and an
afterthought. The plaintiff having decided not to complete the sale and
purchase agreement has been desperately seeking for the last 14 years to
find a way to escape the consequences of its breach of contract. Thirdly,
one of the requirements of s 66 is that the defendant must receive an
advantage under the void agreement. As the moneys were applied
towards discharge of the 3rd party’s liability, the defendant did not receive
any advantage under the void agreement (Khem Singh v Anokh Singh
[1933] 2MLJ 228; Rolled Steel Products (Holdings) Limited v British Steel
Corporation & Ors [1986] 1 Ch. 246 (CA); Reversion Fund and Insurance
Co. Ltd v Maison Cosway Limited [1913] 1 K.B. 364; Bowstead and
Reynolds on Agency 18th Edn p 475; The Law of Restitution Goff & Jones
5th Edn p 586).
The Carah Decision confirmed that the defendant had the power to
sell the lease. On the other hand, the Perdana Merchant Decision declared
that the defendant’s appointment as the R&M to be invalid, null and void.
However, the Carah Decision only relates to the power of a R&M under a
debenture to sell the Lease. It did not make a declaration that the
defendant’s appointment was valid. It was premised on the assumption
that the defendant’s appointment as the R&M is valid.
What is the legal effect of an act which is void? According to Black’s
Law Dictionary Seventh Edition, the words ‘null’ and ‘void’ are defined as
‘having no legal effect; without binding force; of no legal effect.’ In like vein,
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void has been defined in Words, Phrases & Maxims – Legally & Judicially
Defined, Anandan Krishnan Vol. 14 as “A transaction is ‘void’ means that it
is non-existent from its very inception.’
As a result of the Perdana Merchant Decision, the defendant was
never the R&M of the 3rd Party. As such, the defendant could not have
been vested with the power to sell the Lease. Consequently, he could not
have validly entered into the SPA in the capacity as the R&M of the 3rd
Party. Therefore in law, and pursuant to the Perdana Merchant Decision,
the defendant was ordered to make a full refund of all funds, assets and
undertakings received by him.
It is also pertinent to note that
notwithstanding the Perdana Merchant Decision, the defendant did not
obtain any ratification for the SPA from the 3rd Party. In the circumstances,
the Court concludes that the SPA has become void. In the light of the
foregoing, the Court will now turn to issue (d).
Whether the defendant is bound to make restitution of the Deposit to the
plaintiff?
In law it is provided that where a contract becomes void any person
who has received any advantage under such contract is bound to restore it
(s 66 Contracts Act 1950). It is irrelevant whether any party committed any
breach of the terms of the contract. Suffice it to say that any monies or
advantage received by a party must be restored to the other party (Ted
Bates (M) Sdn Bhd v Balbir Singh Jholl [1979] 2 MLJ 257 (FC)). Applying
the principles above to the present case, as the SPA has become void the
defendant is bound to make full restitution of the Deposit to the plaintiff.
Having ruled against the defendant, it now falls upon the Court to
determine whether the 3rd Party is liable to indemnify the defendant? It was
argued for the defendant that should the defendant be found liable to
refund the Deposit to the plaintiff, the 3rd Party is liable to indemnify the
defendant (ss 70 and 71 Contracts Act 1950). In reply, the 3rd Party
contends that (i) the defendant entered into the contract to sell the Lease to
the plaintiff, (ii) the Deposit was deposited into the defendant’s bank
account operated solely by the defendant, (iii) because of the Perdana
Merchant Decision the defendant is liable to compensate and restore the
Deposit to the plaintiff, (iv) the defendant is personally liable pursuant to s
183(1) of the Companies Act, 1965, (v) the defendant had no power to sell
the Lease under the National Land Code, and (vi) the defendant’s failure to
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respond to the 3rd Party’s letter dated 26.5.2006 thereby admitting the
contents of the same.
In this case, the plaintiff paid the Deposit to the defendant who
credited it into a bank account in the name of “Carah Enterprise S/B
(Receivership).” That account was operated solely by the defendant as
R&M of the 3rd Party. The evidence shows that on 31.12.1996 the
defendant applied a sum of RM818,442.78 towards discharge of the 3rd
Party’s liability of the balance lease rental for the Lease to Johor Port
Berhad. It is the defendant’s contention that the 3rd Party received the
advantage and was unjustly enriched at the plaintiff’s expense as the
Lease is still owned by the 3rd Party.
The 3rd Party’s argument that the defendant is personally liable
pursuant to s 183 of the Companies Act is misconceived. Since the
defendant was never a R&M, s 183, which is a provision specifically on
receivers and managers, is not applicable.
The 3rd Party also argued that the defendant had no authority to sell
the Lease. In reply, it was argued for the defendant that the Carah
Decision makes it clear that the defendant had the power to sell the Lease.
Even if the defendant had the power to sell the Lease, that power is
premised on the validity of his appointment as R&M. Since the defendant’s
appointment is null and void, all actions and transactions undertaken by
him qua R&M have also become void.
The 3rd Party’s contention that the defendant’s failure to respond
amounts to an admission is also misconceived. The Court agrees with the
defendant’s submission that failure to reply a letter does not and cannot be
construed as an admission to the contents of the letter (London & North
Western Railway Company v Jones [1915] 2 KB 35 ). There is also no
evidence to show that the defendant admitted liability to the 3rd Party’s
demands.
On the facts as disclosed in the evidence, the Court finds that the
defendant applied the sum of RM818,442.78 to pay the balance lease
rental on the Lease. The payment was made to Johor Port Berhad. It is
also not disputed that the 3rd Party is still the registered owner of the Lease.
At this point, it is pertinent to note that as a result of the Perdana Merchant
Decision, the defendant and the 3rd Party entered into a settlement
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agreement. Cheques for the total amount of RM10,750,000.00 was
delivered to the 3rd Party’s then solicitors in full and final settlement. This
situation fits squarely within s 70 of the Contracts Act and the illustration
which provides as follows:
70.
A person who is interested in the payment of money which another is
bound by law to pay, and who therefore pays it, is entitled to be reimbursed
by the other.
ILLUSTRATION
A, the owner of a holding situated within a Town Board area, allows the
assessment due thereon to fall into arrear. The Chairman of the Town
Board seizes movable property found on the holding with a view to its sale
by public auction under the Town Boards Enactment [FMS Cap. 137]. B
having an interest in the movable property pays the arrear. A is bound to
make good to B the amount so paid.
In order for s 70 to operate in the defendant’s favour, the defendant must
satisfy three conditions. Firstly, the 3rd Party was bound by law to pay the
balance lease rental. Secondly, that that 3rd Party did not pay and so the
defendant paid it. Third, that the defendant was interested in the payment
of the balance lease rental.
The evidence led shows that pursuant to the lease agreement with
Johor Port Authority dated 9.12.1991the 3rd Party was required to pay for
the Lease a one-off rental of RM1,960,000.00. The Lease was liable to be
forfeited as the 3rd Party did not pay the balance lease rental. The
defendant acting as the R&M applied the Deposit towards payment of the
balance lease rental to Johor Port Berhad. At the material time, the
defendant purporting to act as the R&M of the 3rd Party as Vendor and the
plaintiff as purchaser were all parties interested in the Lease. On this
score, the Court finds that all the three conditions have been satisfied.
En. Hassan Bin Abd Hamid (TPW1) a director of the 3rd Party
company admitted that the 3rd Party has benefited by the payment of the
monies by the defendant to Johor Port Berhad as the Lease is still owned
by the 3rd Party. TPW1 also admitted that the settlement agreement was
entered into by the 3rd Party, the defendant and other parties as full and
final settlement of the Perdana Merchant Decision. In the circumstances,
the Court is driven to the conclusion that the defendant is entitled to be
reimbursed by the 3rd Party.
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For the reasons adumbrated above the plaintiff’s claim is allowed in
prayer (a), (b) and (c). The defendant’s claim against the 3rd Party is
allowed in prayer (a), (b), (c), and (d).
(VERNON ONG)
JUDGE
HIGHT COURT MALAYA
JOHOR BAHRU
DATED:
24TH MARCH 2011
COUNSEL
Ng Chew Hor - Tetuan Ng. Fan & Associates. No. 26A, Jalan Abiad, Taman Tebrau Jaya,
80400 Johor Bahru – for Plaintiff.
Nitin V. Nadkarni and Chrissie Lim Wen Hsin (with him) - Tetuan Lee Hishamuddin Allen &
Gledhill, Level 16, Menara Asia Life, No. 189 Jalan Tun Razak, 50738 Kuala Lumpur – for
Defendant.
Mohamed Tahir bin Hj Abd Rahman – Tetuan Mohamed, A. Ali & Associates, 50A, Jalan
Sena 9, Taman Rinting, 81750 Masai, Johor - for Third Party.
VO-j-22-222-2002/mj
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