Yee

- vs -

Wong Nam Sang Enterprise Sdn Bhd

Judgment

Hashim Yeop A Sani SCJ

(delivering the judgment of the court)

1. This appeal arose out of a sale and purchase agreement relating to premises No 16 Persiaran Puteh, off Klang Road, Kuala Lumpur which agreement was executed on 23 June 1981 between the appellant (first defendant in the court below) as vendor and the respondent (plaintiff in the court below) as purchaser for a consideration of $230,000. At the time of the execution of the said sale and purchase agreement, a sum of $54,000 was paid by the purchaser by way of deposit. Under cl 3 of the said agreement, the balance of the purchase price was to be settled within six months from the date of the agreement, that is, on or before 22 December 1981.

2. It does not seem to be disputed that several sums of money were paid in instalments towards the purchase price and that by 9 December 1981 there was apparently a balance of $150,000 of the purchase price yet to be settled.

3. It is also not disputed that the purchaser had to obtain loans to finance the balance of the purchase price and that the property in question was at the material time subject to a charge. Neither of these facts were, however, mentioned anywhere in the said agreement. There was, as a result, a delay in providing the necessary undertaking before the loans could be obtained and when the agreed period of six months expired on 22 December 1981 the balance of the purchase price was still not settled. The appellant then instructed Messrs Lee Beng Cheang & Co to rescind the said agreement and forfeited the deposit.

4. It would appear that the learned trial judge, while accepting that the said agreement provided for the reciprocal obligations of the parties, was also of the view that there was a “condition precedent” to the performance of the obligations. K Umar Rahah v EL Magness [1985] 1 MLJ 116 was cited. Then the trial judge proceeded to identify what she thought was the condition precedent in this case. She concluded that there was an implied duty on the part of the appellant to cooperate and not to hinder or obstruct the performance of the agreement. On the facts as found by her, the learned judge attributed the delay in the settlement of the balance of the purchase price to the appellant and his solicitors, Messrs Lee Beng Cheang & Co. She also held there was no justification on the part of the appellant to terminate the agreement as he and his solicitors were at fault throughout and that they were the causes of the delay that prevented the respondent from fulfilling their part of the bargain.

5. The trial judge then made the following orders against the appellant:

   1. to return the deposit of $54,000 with interest at the rate of 8% per annum from 23 June 1981 to date of payment;

   2. to repay all necessary expenses incurred by the respondent in entering into the said sale and purchase agreement.

6. To complete the record, it may be mentioned that the suit in the court below included also one Yong Sai Moi as the second defendant, and the Registrar of Titles as the third defendant. The claim against the second defendant was dismissed because the learned judge found that fraud as envisaged under s 340(2)(a) of the National Land Code had not been proved. As regards the third defendant, the learned judge awarded costs against him for wrongly removing the caveat without a proper service of Form 19C. There was, however, no appeal by the third defendant. There was also no cross-appeal by the respondent with regard to the rejection of the allegation of fraud against the second defendant.

7. It would seem to us that a basic question to be settled first in this appeal is the order in which the obligations of the parties in the said sale and purchase agreement were to be performed. The relevant provisions of the agreement in this regard are cll 3, 4, 5, 7 and 9.

8. It needs to be mentioned immediately that cl 11 of the agreement expressly provides that time shall be the essence of the contract. There was no provision anywhere in the agreement for enabling any extension of time.

9. Now cl 3 of the agreement expressly and clearly provides that the balance of the purchase price “shall be deposited with the solicitors, Messrs Lee Beng Cheang & Co within six (6) months from the date hereof” in default of which “the deposit shall be absolutely forfeited” and the agreement “shall absolutely determine”.

10. Clause 4 of the agreement also provides clearly that the vendor “shall immediately on being notified of such payment” made under cl 3 execute a valid transfer in favour of the purchaser and deliver the same to the purchaser’s solicitor.

11. Clause 5 provides that Messrs Lee Beng Cheang shall hold the balance of the purchase price as stakeholders.

12. Clause 7 of the agreement again clearly provides that vacant possession of the said premises shall only be given to the purchaser within one month from the date the balance of the purchase price being deposited with the said solicitors.

13. It is quite clear therefore that the so-called “condition precedent” as described by the learned trial judge can never exist on the face of the express and clear provisions of the said clauses of the agreement referred to above. There is no doubt that for the appellant to comply with cl 4 there must be actual deposit of the balance of the purchase price within the time prescribed in the said agreement.

14. The importance of cl 3 can also be seen by the provision of cl 7 whereby the appellant is only obliged to deliver vacant possession of the premises within one month from the date of the deposit of the balance of the purchase price. This means that the vendor is not obliged under the agreement to deliver vacant possession immediately upon payment of the purchase price. It could well be that the one month’s grace period given to the appellant to deliver vacant possession was to enable him to effect the necessary transfer in favour of the purchaser. In K Umar Rajah v EL Magness [1985] 1 MLJ 116 the condition precedent was not only expressed but conceded by appellant’s counsel (p 118).

15. Looking at the facts, it would seem to us quite clear that the real cause of the delay was the time taken in the exchange of correspondence between Messrs Lee Beng Cheang & Co and the solicitors of the finance company, Malayan United Finance Bhd. The finance company had in fact approved the loan on 29 August 1981 subject to a number of conditions which are the usual conditions where there is an existing charge on the property.

16. In our view, since Messrs Lee Beng Cheang & Co was the common solicitor of both the appellant and the respondent at the material time and who drafted the said sale and purchase agreement for the parties, it would have been a very simple process of giving the usual solicitors’ undertaking and to have the relevant documents prepared to enable the release of the money from the finance company.

17. The learned trial judge would appear to have accepted the fact that Messrs Lee Beng Cheang & Co should have acted promptly having regard to the limited period provided by the said agreement. In her grounds of judgment (at p 30) the learned judge said:

    Under these circumstances, one would have expected the solicitors to act with speed as the completion date was drawing near and that they were fully aware that MUI was willing to release the redemption sum.

18. Based on her own pronouncement, the cause of the delay could not have been attributed to the appellant. Accordingly, we are of the view that the appellant was perfectly entitled to rescind the agreement.

19. As regards the forfeiture of the deposit of $54,000, we have to look at the provision of the agreement in the matter of forfeiture of the deposit. Clause 1 of the agreement described the $54,000 as a payment “by way of deposit for the due performance by the purchaser of the several terms hereinafter contained”. Clause 3 of the agreement provides that the balance of the purchase, price shall be deposited with the common solicitor within a specified period and in default of which the, deposit “shall be absolutely forfeited to the vendor” and the agreement shall absolutely determine and of no further force or effect.

20. The crux of the matter is whether the $54,000 is a true deposit. If it is a true deposit or earnest money (the two terms being interchangeable) then the sum can lawfully be forfeited by the appellant — see also Sun Properties Sdn Bhd v Happy Shopping Plaza Sdn Bhd [1987] 2 MLJ 71. Here the intentions of the parties as to what happens to the deposit are clearly expressed in the agreement. In our view, the $54,000 is a true deposit and can lawfully be forfeited.

21. In conclusion, we hold that the appellant was within his right under the sale and purchase agreement to rescind the agreement and to forfeit the deposit. We accordingly allow the appeal with costs and set aside the orders made against the appellant. Parties shall bear their own costs in the court below.

22. Deposit to be refunded to the appellant.

Cases

K Umar Rajah v EL Magness [1985] 1 MLJ 116; Sun Properties Sdn Bhd v Happy Shopping Plaza Sdn Bhd [1987] 2 MLJ 71

Representation

T Thomas (Miss CL Wong with him) for the appellant.

Cyrus V Das for respondent.