Judgment

Shaik Daud Md Ismail, JCA

(delivering the judgment of the court)

1. This is an appeal from the decision of the High Court Kuala Lumpur which had dismissed the appellant's claim against the respondent. The appellant's claim essentially is for loss of profits arising out of the respondent's alleged breach of contract.

2. The background facts are that the appellant is an option holder for a property known as Lot 2084 Section 41, Kuala Lumpur, (the said property) with power to sell the said property to the respondent. It is not disputed that at all times, the appellant was not the registered proprietor of the said property and this is known from the beginning by the respondent. In fact the said property was jointly owned by seven persons living in different parts of the world and this too is known to the respondent.

3. Through negotiations and meetings held from December 14, 1989 the respondent had offered to purchase the said property from the appellant at RM64 per sq. foot. The appellant had accepted the offer. According to the appellant, at a meeting on April 17, 1990 at the office of Messrs Zain & Co, a firm of solicitors in Kuala Lumpur, the appellant had informed a representative of the respondent that:-

   1. the appellant through a nominee, one Sulaiman Daud, will purchase the said property from the registered proprietors; and

   2. the nominee, Sulaiman Daud, will execute a sale and purchase agreement with the respondent to sell the said property to the respondent for a sum of RM1,218,560.

4. To achieve the above objectives, the parties would prepare and execute back-to-back agreements in that the nominee, Sulaiman Daud, would sign the sale and purchase agreement with the respondent in order to get the deposit from the respondent and using this money, the nominee, Sulaiman Daud, will execute a sale and purchase agreement with the registered proprietors. It is the contention of the appellant that the respondent was at all material times aware of this back-to-back transaction.

5. Subsequent to the meeting of April 17, 1990, another meeting was held at the office of the respondent where the officers of the respondent, the appellant and the nominee, Sulaiman Daud, were present and thereafter the respondent had instructed a sale and purchase agreement to be prepared by the solicitors Messrs Zain & Co. As a result Messrs Zain & Co prepared a draft agreement to be sent to the respondent.

6. The respondent in return indicated their satisfaction with the said draft agreement and thereafter on April 25, 1990 the same solicitors prepared four final copies of the agreement and transmitted them to the respondent for its execution. The respondent refused and failed to sign the agreement and thereby refused to proceed with the sale and purchase of the said property resulting in the appellant and his nominee not being able to purchase the said property from the registered proprietors.

7. The respondent on the other hand denied the averments of the appellant and contends that it was its sole intention from the very beginning to deal solely with the registered owners and would only execute a sale and purchase agreement with them. The respondent contended that the sale fell through as the appellant had failed to arrange for the execution of the sale and purchase agreement with the registered proprietors or their attorneys. The respondent denied that it had agreed to bind itself with either the appellant or his nominee.

8. The learned Judge had dismissed the appellant's claim with costs broadly on the ground that although the respondent had agreed to purchase the said property, the agreement between it and the nominee, Sulaiman Daud, shows that Sulaiman Daud was the registered owner of the said property when at all material times, Sulaiman Daud, had not executed the agreement with the original registered owners. The learned Judge also held that the option granted to the appellant had lapsed when he sought to transact the back-to-back agreements and that the sale of the said property to Sulaiman Daud was subject to obtaining an order of the court by one of the co-owners.

9. We are of the view that the learned Judge erred in that he failed to examine the contemporaneous documents which would conclude that the respondent was aware from the very beginning that the appellant was not the registered owner of the said property and he had entered into the transaction solely for profit.

10. The learned Judge appeared to have failed to consider and appreciate seriously the evidence of the sole witness for the respondent one Kamaruzaman Kamaludin, especially on his admissions.

11. His evidence if properly analysed entailed the premise that he knew all along that the appellant was not the owner of the said property and hence the need to have the back-to-back transaction. He knew the true identity of the owners whose solicitors were Messrs Shearn Delamore & Co. The learned Judge appeared to have neglected to consider or consider sufficiently the handwritten note dated April 25, 1990 by Kamaruzaman to the appellant where he acknowledged receipt of the sale and purchase agreement from Messrs Zain & Co and that "they would sign first and return same to Zain & Co on 3rd May 1990". When this note was sent to the appellant, Kamaruzaman knew the actual situation as to the ownership of the said property.

12. In spite of this, the respondent was prepared to sign the agreement. In the light of this evidence, Kamaruzaman’s evidence of his understanding that Sulaiman Daud would purchase the said property from the owners first and then only would sell it to the respondent should not be accepted as the truth.

13. The evidence of the solicitors acting for the appellant also confirmed the need to execute the back-to-back transactions was as per instructions that the appellant was to utilise the payments from the respondent to purchase the said property. Hence the need, as confirmed by Kamaruzaman in his handwritten note to the appellant, for the respondent to sign the sale and purchase agreement with Sulaiman Daud first before Sulaiman Daud needed to sign the agreement with the owners. The fact that Kamaruzaman knew that the agreement between Sulaiman Daud and respondent was to be signed first was further enhanced by the evidence that there was a request by the appellant for the respondent to pay the 10% deposit direct to the landowners or to the appellant's solicitors, M/s Zain & Co.

14. Therefore it is evident from the series of contemporaneous correspondences between the appellant and the respondent that it was agreed between the parties that the sale and purchase agreement between the appellant and the respondent would be signed first, to enable the appellant to obtain the necessary funds to sign the agreement with the land owners. There is clear evidence from the appellant's solicitor explaining the mechanics of how this back-to-back transaction was to work and all along was within the knowledge of the respondent. Therefore when the learned Judge held the reverse it went against the evidence adduced.

15. The issue finally was whether a contract existed between the appellant and the respondent and if so, when.

16. From the totality of the evidence we were satisfied that a contract existed between the appellant and the respondent and this was on April 25, 1990 when the respondent confirmed the final draft of the agreement. From that date onwards a contractual relationship existed between the appellant and the respondent.

17. We were also satisfied that from a series of contemporaneous correspondences between the solicitors for the appellants and the solicitors for the landowners, a contractual relationship existed between the landowners and the appellant.

18. The respondent aborted the agreement with the appellant by its letter dated May 25, 1990 wherein for the very first time it raised the issue of the appellant or his nominee, Sulaiman Daud, not being the registered owner of the said property when at all material times it was aware of the actual circumstances.

19. This sort of transaction was not uncommon. A vendor having neither a title nor the power to obtain a title was not prevented to enter into a contract to sell land or for that matter any chattel, provided he promised to transfer the title on acquiring it. If he failed to do so, the vendor would be equally entitled to be sued for specific performance. The fact that at the date of the contract the vendor had neither the title nor the power to call for the title is itself no answer to a suit for specific performance by either party. [See Brickles v Shell [1916] 2 AC 599; Halimah Abdul Rahman v Fatimah Abdullah [1976] 2 MLJ 64; and Sinniah Pampayan v Muthuvela Pillai Palanichamy Pillai [1997] 1 AMR 319].

20. In the present case, if the reverse took place i.e. if the appellant failed to transfer the said property to the respondent after it had been transferred to him or his nominee, the respondent could successfully sue him for specific performance. It came to light that subsequently the State Authority acquired the said property for the respondent and this might well explain the reason for the respondent aborting the back-to-back transaction.

21. Therefore, in view of the admissions by the respondent of its knowledge at all material times that the transactions were to be carried out on a back-to-back basis and in the light of the contemporaneous documents and the totality of the evidence, we were satisfied that the respondent had breached the agreement with the appellant resulting in his loss of profits which in our view is the natural consequence of the breach. We, therefore, allowed the appeal with costs here and below, set aside the order of the High Court and entered judgment in favour of the appellant in terms of prayers (a), (b) and (e) of his statement of claim. We also ordered the deposit be refunded to him.

Cases

Brickles v Shell [1916] 2 AC 599

Halimah Abdul Rahman v Fatimah Abdullah [1976] 2 MLJ 64

Sinniah Pampayan v Muthuvelu Pillai Palanichamy Pillai [1997] 1 AMR 319

Representations

Maidzuara Mohamed & Mohd Izral Khairy (Logan Sabapathy & Co) for Appellant

Ramid Khan (Zainur Zakaria & Co) for Respondent

Notes:-

This decision is also reported at [2000] 2 AMR 1262