Judgment

P.S. Gill J

1. The plaintiffs claim specific performance in respect of an agree for the sale of a piece of land known as Lot No 295 held under grant No 17259 situated in the Mukim of Tebrau, District of Johore Bahru measuring in area 1,000.5 acres or thereabout (hereinafter referred to as ‘the said land’) and damages for wrongful termination of the agreement.

2. By the said agreement dated 20 August 1984, Rumah Nanas, the second defendant company (hereinafter referred to as ‘the second defendant’) agreed to sell the said land free from encumbrances and with vacant possession to the plaintiffs at a price of $47,939,958.

3. The plaintiffs as were required by cl 3.1 paid a sum of $4,793,995.80 which sum represented 10% of the purchase price by way of forfeitable deposit upon the execution of the said agreement. The balance of the purchase price was to be paid within six months from the date of the execution of the said agreement under cl 3.2.

4. The agreement contained two other relevant clauses, namely cll 3.3 and 3.4 which read as follows:

   3.3

   In the event the purchaser is unable to complete the sale and purchase on or before the completion date, then upon such written notice given by the purchaser to the vendor two (2) weeks prior to the completion date, the vendor will grant an extension of time of three (3) months to the purchaser to complete the sale.

   3.4

   In the event the purchaser is still unable to complete the sale and purchase within the extended period of three (3) months, then at the written request of the purchaser, the vendor shall grant a further period of three (3) months to the purchaser to complete the purchase, subject that the purchaser shall pay to the vendor a sum of M$11,000 per day as payment of liquidated damages to be calculated on the balance purchase price so due and payable until date of actual payment.

5. Since the execution of the agreement, the plaintiffs requested a number of extensions in order to find means whereby the terms of the agreement could be concluded. The second defendant granted the plaintiffs these extensions. On 12 December 1988 the solicitors for the second defendant wrote to the plaintiffs informing them that their clients were terminating the said agreement forthwith on the ground that the plaintiffs were unable to complete the purchase of the said land. On 18 December 1988 the plaintiffs filed a caveat against the said land and on the 31 January 1989 the plaintiffs filed the present action. The defendants filed their defence on 10 October 1991.

6. The main issues for determination are:

   1. whether the defendants induced the plaintiffs to enter into the sale and purchase agreement on the strength of an undertaking to obtain a loan for the plaintiffs to enable the plaintiffs to complete the sale and purchase of the said land free of encumbrances and with vacant possession;

   2. whether the second defendant agreed to enter into a joint venture scheme with the plaintiffs to develop the land should the plaintiffs be unable to obtain the loan;

   3. whether the defendants acted in breach of the said oral undertaking;

   4. whether the termination of the said agreement was lawful.

7. For the plaintiffs Mr. Yap Chui Kui (PW1) gave evidence in court stating that he was the managing director of the plaintiffs’ company, which company is a housing developer, having developed some 1,095 units of houses in Senai. In 1984 PW1 was looking for land with a view to developing it. At about that time he came to know of the land which is the subject matter of this suit and which was owned by the defendants. After making some enquiries PW1 managed to contact the first defendant through the help of a mutual friend by telephone. PW1 asked the first defendant whether he was intending to sell the land in question and the first defendant replied that he was prepared to do so. PW1 intimated to the first defendant that he was keen to purchase the land but his company had a paid-up capital of only $5m. The first defendant stated that PW1’s company should use the $5m as a down payment and he promised that he and his company would obtain a loan from the National Bank of Brunei or another source to enable PW1 to pay the balance of the purchase price, and PW1 could use the land as security for the loan. PW1 was also told that there were no encumbrances on the said land. Should the plaintiffs be unable to secure a loan, the first defendant said that his company (the second defendant) would enter into a joint venture scheme with the plaintiffs. PW1 was further told by the first defendant to contact his solicitors Messrs AL Looi and his resident director in Johore Bahru, Mr. Sohaimi, and to do so within a few days so as to allow the first defendant time to give them the necessary instructions.

8. A few days later PW1 did see Mr. AL Looi, now deceased, regarding the purchase of the land. PW1 informed Mr. Looi of what had transpired between him and the first defendant on the telephone. Mr. AL Looi confirmed that he had received instructions from the first defendant regarding the sale of the land. PW1 further enquired from Mr. Looi whether the sale and purchase agreement should cover the oral undertaking by the first defendant with regard to the loan and the joint venture. Mr. Looi told the plaintiffs that it was not necessary to include these terms in the said agreement as the first defendant was a big tycoon and the plaintiffs should trust him. Acting upon such assurance by Mr. Looi the plaintiffs, in reliance on the undertaking given by the first defendant, entered into the sale and purchase agreement by paying $1m for the option to purchase the said land. PW1 signed the option on behalf of the plaintiffs M/s Plenitude Holdings Sdn Bhd on 9 July 1984, while Mr. Sohaimi signed the option on behalf of the second defendant company. Under the terms of the option a further sum of $3,793,995.80 being payment towards the 10% deposit in regard to the purchase price had to be paid on or before 11 August 1984. The balance sum of $3,793,995.80 towards the 10% deposit, was paid by the plaintiffs to the second defendant on 20 August 1984 after the expiry of the option period. At no time did the second defendant raise the question of forfeiture of the initial amount of $1m paid towards the option.

9. The principal witness for the defence was DW1 Tan Sri Khoo Teck Puat who was the chairman of the board of directors of the second defendant. He stated that he was a director of 30 to 40 companies and he was not concerned with the day to day management of these companies, including the second defendant company. DW1 denied speaking to PW1 on the telephone prior to July 1984. He further denied giving an undertaking to PW1 that should the plaintiffs purchase the said land he would arrange the loan. He further denied that he agreed to the second defendant joining the plaintiffs in a joint venture scheme should the loan be not forthcoming. DW1, however, stated that he did sign the sale and purchase agreement and Mr. Sohaimi signed it on behalf of the second defendant. DW1 stated that he was not involved in matters arising out of the sale and purchase agreement after it was signed. The person involved was the executive director Mrs. Thean Bee Lian (DW2). DW1 however confirmed that Mr. Sohaimi was the manager and director of the second defendant company until 1990 when he stopped working for the second defendant company.

10. In the light of the evidence before the court it is not disputed that an agreement was signed by the plaintiffs and the first and second defendants on 20 August 1984. It is also not disputed that an option was granted to the plaintiffs’ representative, PW1, by the second defendant. For that to take place there must have been some form of communication between the parties. While PW1 had categorically stated that he and DW1 spoke on the telephone in regard to the terms of purchase, DW1 on the other hand made no mention whatsoever in his evidence of the circumstances that had led him and the second defendant to grant an option to PW1. In the absence of any cogent and reasonable explanation, I accept as probable that there was indeed communication between PW1 and DW1 prior to the granting of the option to PW1 to purchase the land. Apart from denying the fact that he spoke to PW1, DW1 clearly failed to throw any light whatsoever as to the circumstances that led to the granting of the option and the signing of the agreement.

11. The plaintiffs, a company with a paid-up capital of $5m of which there was 30% equity participation by Yayasan Pelajaran Johore, was unlikely to have agreed to the terms of the sale and purchase agreement unless the first defendant had unequivocally given an oral undertaking to secure a loan for the plaintiffs, or at the very least promised PW1 that the second defendant would participate in a joint venture with the plaintiffs if the loan was not forthcoming. It was well known that in 1984 the first defendant had a substantial control in the Bank of Brunei and was a very prominent figure in banking circles. It is therefore not unreasonable for this court to conclude that he was indeed in a position to agree to assist PW1 in obtaining a loan for the plaintiffs.

12. Counsel for the defendants argued that it was not the function of the first and second defendants to secure a loan for the plaintiffs. It may well be in normal circumstances but we are not speaking of an ordinary banker, but of a banker of some special standing and position who clearly had the necessary ability, perhaps authority to do it, had he chosen to do so. Moreover it was in the interest of the defendants for the plaintiffs to secure the loan, for in such event the plaintiffs could complete the purchase of the land at a price substantial enough to benefit the defendants.

13. It is perhaps appropriate to observe at this point that in giving his evidence DW1 seems to be evasive. I therefore entertain serious doubts as to the credibility of his evidence. He made no attempt to explain how he came to know that the plaintiffs were interested to purchase the said land and what made him give whatever instructions he had given to his solicitors pertaining to the sale of the said land.

14. One very glaring contradiction emerged in the course of cross-examination of DW1 by counsel for the plaintiffs. DW1 maintained that he did not give instructions to his solicitors Messrs AL Looi through Mr. Sohaimi in respect of the sale and purchase of the land, but when confronted with the contents of an affidavit sworn by him on 9 February 1989 marked as P8, where he affirmed, ‘… my instructions pertaining to the sale of the land were communicated to my then lawyer AL Looi Esq through the Resident Director Mr. Sohaimi’, DW1 sought to explain that it was an error and that he was confused. Considering the standing of DW1 in the banking world and in view of the fact that his affidavit was affirmed in Sydney, Australia before a notary public, it is indeed a futile and totally unconvincing attempt on the part of DW1 to explain the contradictory statement.

15. Also under cross-examination DW1 was referred to a letter dated 2 June 1986 (at p 31 of the agreed bundle ‘P2’). It was a letter written by the plaintiffs to their solicitors Messrs Lim & Hooi with reference to an earlier letter dated 27 May 1986 addressed to DW1 in connection with seeking DW1’s assistance for a loan to enable the plaintiffs to complete the purchase of the said land. DW1 at first denied knowledge of the said letter, but when pressed under cross-examination, he admitted that he was aware of the contents of the letter. The evidence in fact shows that DW1 himself had referred to it in an affidavit affirmed by him dated 7 July 1989 (exh ‘P9’).

16. It is therefore proved that on two different occasions DW1 had given contradictory statements and on both occasions he provided no reasonable or any credible explanation.

17. At the risk of repetition I would say that DW1 was an evasive and an unreliable witness. He even denied any knowledge of important letters referred to at pp 31, 98 and 100 of the agreed bundle ‘P2’. I found it highly improbable that DW1 had not been informed of the important developments that took place concerning this particular transaction. How could he, as he himself stated in his evidence to be ‘involved in the formation of the policies and implementation of the policies of the Board’, be unaware of such important development? More so in the light of DW2’s testimony that DW1 was the most influential person on the board, and a decision maker. Evidently DW1 could not be described merely as a rubber stamp; on the contrary he was a person who kept himself abreast with all important decisions in regard to the company, and evasiveness on the part of DW1 was clearly deliberate and in no way could it be described as an act of mere forgetfulness.

18. On the evidence, both oral and on the contemporaneous documentary evidence, I can only conclude as a fact that the plaintiffs have proven on a balance of probabilities that DW1 had promised to secure a loan for the plaintiffs and that in the event that such a loan could not be secured he had given an undertaking to join the plaintiffs in a joint venture scheme to develop the said land.

19. One of the main contentions of Raja Aziz, counsel for the defendants, was that even if the plaintiffs had proved the alleged representations, the position in law clearly is that those representations had no effect on the agreement of 20 August 1984 and are therefore consequently irrelevant by reason of the express provisions of cl 19.1 of the agreement which states that the agreement:

    shall represent the entire agreement by and between the parties hereto, except as otherwise provided for herein and it may not be changed except by written agreement duly executed by the parties hereto.

20. My understanding of the law is that the prohibition against the admissibility of oral evidence under s 92 of the Evidence Act 1950 (‘the Act’) would apply when all, as opposed to some only, of the terms of the contract are written into the agreement; when there is evidence that some terms are given orally and some in writing, oral evidence can be given to prove the terms agreed to orally.

21. The purpose of adducing oral evidence clearly is not to contradict, vary, add to or substract from the terms of the said agreement but to prove the existence of a separate contractual provision as provided for under s 92(c) of the Act.

22. The primary purpose of proving the pre-contract statements in this case was not to contradict, vary, add to or subtract from the terms of the agreement, but to prove the existence of a separate contractual provision. I therefore see no reason why such oral terms should not be admitted. This point was dealt with in the case of Tan Chong and Sons Motor Co (Sdn) Bhd v Alan McKnight [1983] 1 MLJ 220. It was further argued by learned counsel for the defendant that even if the court were to accept the oral evidence, it amounted to a promise to lend money and as a general rule cannot be specifically enforced at the suit of either party. With respect to counsel for the defendant, the oral promise made by the first defendant was not in respect of a contract to lend money, but a promise to obtain a loan for completion of the purchase of the land and if the loan was not forthcoming to enter into a joint venture with the plaintiffs to develop the land.

23. It was further submitted by learned counsel for the defendants that PW1 did not disclose the identity of the mutual friend who had initially introduced him to the first defendant via the telephone. If counsel had felt that this point was of some importance to the defendants’ case why did he not cross-examine PW1 as to the identity of the mutual friend? Counsel for the defendants also submitted that PW1 should have called Mr. Mohamed Sam Sailan, a director of the plaintiffs as a witness to confirm the fact that PW1 had spoken to him about the undertaking given by the first defendant to PW1. Why on earth should PW1 call Mr. Mohamed Sam Sailan who took no part in any of the negotiations between PW1 and the defendants? In what way would such evidence shed any fresh light on the events that took place prior to the execution of the sale and purchase agreement of the said land? The court was asked to draw an adverse inference against the plaintiffs for their failure to call the two witnesses. With respect this application of the law by counsel for the defendants is completely misconceived.

24. It is an established principle of law that before an adverse inference under s 114(g) of the Act can be drawn there must be (a) withholding or suppression of evidence and (b) non-production of an important and material document or witness. See Synn Lee & Co Ltd v Bank of China [1962] MLJ 395 and Munusamy v PP [1987] 1 MLJ 492 at p 494.

25. In the present case there is clearly no question here of an attempt by the plaintiffs either to withhold or to suppress evidence. There is therefore no justification whatsoever for drawing such an adverse inference under s 114(g) of the Act.

26. As stated earlier the agreement made certain provisions for extension of time to be given to the plaintiffs to enable them to comply with the provisions of the sale and purchase agreement. Counsel for the plaintiffs has submitted that in view of the many oral assurances and representations made by Mr. Sohaimi, the resident director of the second defendant that the first and second defendants would not terminate the agreement, time was no longer the essence of the contract. Counsel also argued that there was waiver on the part of the second defendant.

27. After the expiry of the agreement on 20 August 1985, the plaintiffs were in fact given a series of extensions by the defendants. It may well be that time originally was of the essence of the contract as stated in cl 3.5 of the agreement as follows:

    In the event of the purchaser’s failure, neglect and/or refusal to complete the purchase of the said land within the time stipulated above, the vendor shall be at liberty and be entitled to forfeit the sum of M$4,793,995.80 as agreed liquidated damages (as the parties have agreed and realize that otherwise damages cannot be determined) and thereafter this agreement shall be treated as null and void and of no legal effect whatsoever.

28. But time was no longer of the essence when, as manifested by the conduct of the defendants, it was waived. The correspondence and dealings between the parties down to and including up to 12 December 1988 confirm this fact. Time in fact and in law was no longer the essence of the contract. Waiver has been defined in the case of WJ Alan & Co Ltd v El Nasr Export & Import Co [1972] 2 All ER 127; [1972] 2 QB 189; [1972] 2 WLR 800 by Lord Denning where at p 140 of the same judgment his Lordship stated:

    The principle of waiver is simply this: if one party, by his conduct, leads another to believe that the strict rights arising under the contract will not be insisted on, intending that the other should act on that belief, and he does act on it, then the first party will not afterwards be allowed to insist on the strict legal rights when it would be inequitable for him to do so: see Plasticmoda Societa Per Azioni v Davidsons Manchester Ltd [1952] 1 Lloyd’s Rep 527 at p 539. There may be no consideration moving from him who benefits by the waiver. There may be no detriment to him by acting on it. There may be nothing in writing. Nevertheless, the one who waives his strict rights cannot afterwards insist on them. His strict rights are at any rate suspended so long as the waiver lasts. He may on occasion be able to revert to his strict legal rights for the future by giving reasonable notice in that behalf, or otherwise making it plain by his conduct that he will thereafter insist on them: see Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd [1955] 2 All ER 657; [1955] 1 WLR 761. But there are cases where no withdrawal is possible. It may be too late to withdraw; or it cannot be done without injustice to the other party. In that event he is bound by his waiver. He will not be allowed to revert to his strict legal rights. He can only enforce them subject to the waiver he has made.

    See also Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319 at p 322. It is significant to note that when at all material times the plaintiffs defaulted paying the balance of the purchase price the defendants made no attempt whatsoever to forfeit the deposit.

29. It was argued by counsel for the defendants that by a letter dated 26 May 1986 (P2/98) the second defendant’s solicitors wrote to the plaintiffs’ solicitors that the second defendant had considered the agreement to have lapsed. This argument does not hold water, because on 31 March 1987 the second defendant’s solicitors wrote to the plaintiffs’ solicitors giving them 14 days’ notice within which time to complete the terms of the agreement, which period was also subsequently waived by the defendants. See also the letter dated 30 April 1980 (P2/101). From the extensive correspondence between the plaintiffs and the defendants it is abundantly clear that the parties had been negotiating for joint venture as alleged by the plaintiffs, or for a ‘new purchase’ as conceived by the second defendant. In actual fact, DW2 did state in her evidence that she gave instructions to her solicitors AL Looi through Mr. Sohaimi to write to the plaintiffs in regard to the matter. There is no doubt in my mind that such negotiations did take place between PW1 and Mr. Sohaimi acting on behalf of the defendants. The denial by the defendants does not lend support to their contention that there were no negotiations between them and the plaintiffs. See exh ‘P2’.

30. In fact, it is proven to my satisfaction that Mr. Sohaimi as the resident director of the second defendant, had express and ostensible authority from both the defendants to act for them in the matter relating to this particular transaction. In this regard, the first defendant admitted that he was not suggesting that Mr. Sohaimi was acting outside his scope of authority as a director of the company.

31. What clearly emerges from the correspondence between the parties was that the plaintiffs were awaiting suitable response from the second defendant as to their confirmation on the joint venture (see pp 33 and 122 of P2 and other related proposals at pp 106, 108 and 109 of P2).

32. Again at the risk of repetition I would say that since the plaintiffs were unable to raise a loan either on their own volition or by the default of the first defendant, time no longer constituted the essence of the contract, as evident from the negotiations that continued between the parties. If the defendants had considered time of the essence they ought to have given a reasonable notice of their intention to abandon the contract if the balance of the purchase price was not paid (see Webb v Hughes [1870] LR 10 Eq 281 and Stickney v Keeble [1915] AC 386). The plaintiffs as can be seen from the evidence never abandoned the agreement expressly or impliedly.

33. At the very least if after embarking upon negotiations with the plaintiffs, but still considering time was of the essence of the contract the defendants should have in that event at least given reasonable notice (see Tilley v Thomas [1867] LR 3 Ch App 61).

34. Having found time was no longer of the essence, the notice of termination dated 12 December 1988 was not therefore a reasonable notice. In my mind the contract was never legally terminated and accordingly the plaintiffs were not in breach of the contract.

35. I am also of the view that the failure of the second defendant to terminate the contract after a lapse of three and a half years is wholly inconsistent with their contention that time was of the essence of the contract. Indeed it was consistent with the plaintiffs’ version that Mr. Sohaimi gave assurances and made representations on behalf of the first and second defendants that the second defendant would not terminate the agreement and forfeit the deposit.

36. In this respect the decision in the case of Wong Kup Sing v Jeram Rubber Estates Ltd [1969] 1 MLJ 245 is relevant. The facts of the case were as follows:

    The plaintiff claimed specific performance of an agreement of sale of a rubber estate entered into between him and the defendants or in the alternative for damages or rescission of the contract. Under the agreement, time had been made the essence of the contract, but at the request of the plaintiff the defendants had consented to extension of time for completion on six separate occasions. Eventually the defendants through their solicitors wrote to the plaintiffs on 15 November 1967, insisting that the purchase be completed on the same day. As completion was not made on that day, they wrote to the plaintiff to say that the agreement was terminated. Subsequently the plaintiff offered to complete the contract but the defendants refused, taking the view that the contract was at an end.

    Raja Azlan Shah J (as he then was) held that:

    Once the time for completion was allowed to pass and the parties went on negotiating, then time was no longer of the essence of the contract and the defendants must give reasonable notice of their intention to abandon the contract if the balance of the purchase money was not paid .... the notice of abandonment dated 15 November 1967 was not a reasonable notice .... the contract was never terminated ....

37. I would now turn to consider the adverse inference that could be drawn against the defendants. Counsel for the plaintiffs contended that Mr. Sohaimi should have been called to give evidence on material issues on behalf of the defendants, namely:

    1. whether he advised PW1 that whenever the plaintiffs or PW1 wrote to the defendants their letters must be polite and humble and they should omit all references to the oral undertakings made by the defendants;

    2. whether Mr. Sohaimi did promise PW1 on behalf of the defendants that the second defendant would not forfeit the 10% deposit in view of the oral undertakings given by the defendants.

38. It is quite apparent that Mr. Sohaimi was no small cog in the second defendant company. He was referred to by DW1 as the second defendant’s resident director in charge of land matters in Johore and he was also authorized to negotiate on behalf of the defendants. Evidently he had full knowledge of the negotiations between himself and PW1. For that reason he ought to be the most material witness in these proceedings to testify for the defendants.

39. The question is why did the defendants not call him as a witness? Granted that he had left the employment of the second defendant company in 1990. The defendants should at least inform the court that they had applied for a subpoena to secure Sohaimi’s attendance or alternatively to adduce some evidence that they made sufficient efforts to locate Mr. Sohaimi but were unable to do so.

40. The overwhelming evidence is that PW1 had been in contact with Mr. Sohaimi who represented the second defendant from the very start. A series of meetings between PW1 and Mr. Sohaimi, the resident director, had taken place and Sohaimi was the one who at all times advised PW1. It was Mr. Sohaimi as a representative of the first defendant and a director of the second defendant company who arranged a meeting at the United Malayan Banking Corp in Kuala Lumpur on 7 October 1985 with PW1 and representatives of the bank. The defendants’ denial that Mr. Sohaimi had arranged the said meeting for the plaintiffs is absolutely unacceptable. Mr. Sohaimi also advised PW1 in regard to the substance and tenor of his correspondence with the first defendant in regard to loan facilities. On the contrary I found it reasonable to accept as the truth PW1’s testimony to the effect that when he pressed Mr. Sohaimi regarding the promised loan, the latter informed him (PW1) that he would instruct the defendants’ solicitors to write a letter to the plaintiffs to negotiate for new terms for the purchase of the said land. The fact is confirmed by a letter written on 26 May 1986 by the solicitors of the second defendant, Messrs AL Looi to the plaintiffs’ solicitors asking whether the plaintiffs would negotiate for the purchase of the land. The letter is at p 98 of P2. It states:

    M/s Lim & Hooi, 3rd Floor, UMNO Building, Johore Bahru Without prejudice   26 May 1986 Dear Sirs, Re: Grant 17259 for Lot 295 in Mukim of Tebrau Agreement dated 20 August 1984  We refer to your client’s above purchase. The date fixed for completion had since lapsed. Please let us know whether your client desires to negotiate for the purchase of the land. If so, let us have terms of completion under the new purchase in order that we can revert to our client for their agreement and instructions. Unless we hear from you within ten (10) days, we shall deem your clients do not desire to proceed to complete the purchase subject to the agreed interest as reserved to be payable. We shall upon instructions proceed to formally terminate the sale and purchase. All rights of our client are reserved. Yours faithfully Sgd cc  M/s Rumah Nanas Rubber Estate Sdn Bhd, Johore Bahru.

    On 29 May 1986 the plaintiffs wrote to the first defendant regarding the loan (see p 30 of P2). There was no response from the first defendant.

41. Regardless, the parties continued to negotiate. However on 31 March 1987 the second defendant’s solicitors issued a notice to the plaintiffs giving them 14 days’ notice. PW1 was aggrieved as he felt that the first defendant had failed to honour his promise to obtain a loan. Again, when he confronted Mr. Sohaimi he was informed that the first defendant was having difficulties on account of the National Bank of Brunei scandal (see pp 44–47 of P2) and that in the circumstances the defendants would give the plaintiffs more time. At that period the National Bank of Brunei entered a private caveat on 24 September 1986 against the said land followed by a lien holder’s caveat on 4 December 1987.

42. It is in evidence that after further negotiations between PW1 and Mr. Sohaimi they finally agreed on a compromised arrangement. On 13 May 1987 the plaintiffs wrote a letter to the defendants’ solicitors informing them of the arrangement (see p 33 of P2). A copy was sent to Mr. Sohaimi and the second defendant. The letter states:

    Plenitude Holdings Sdn Bhd 3–B, Batu 2, Jalan Scudai, 80200 Johore Bahru, Johore, West Malaysia, Tel: 07–220816, Telex: BOSKYM MA00044. M/s AL Looi, Advocates & Solicitors, Johore Bahru. 13 May 1987 Dear Sirs, Re: Sale of Grant 17259 for Lot 295 in the Mukim of Tebrau With reference to the above matter, we are discussing with Mr. Sohaimi A Jalil at length and come to a compromising arrangement. Any further development, we will keep you inform. Thank you. Yours faithfully, Sgd YB Mohamed Sam Sailan BSc (Honours), PIS, BSI, AMN, Chairman and MP for Muar. cc (1) M/s Rumah Nanas Rubber Estate Sdn Bhd (2) M/s Lim & Hooi (Ref: HSH/MS/11334/84) (3) En Sohaimi A Jalil

    It is also in evidence that during all these crucial negotiations between PW1 and Sohaimi, important decisions affecting the outcome of the contract were being taken.

43. In the light of what I have stated earlier the failure of the defendants to call Sohaimi, would make the evidence of PW1 uncontroverted on crucial issues. Sohaimi was without doubt the principal person involved in all the transactions with PW1. DW1 himself stated in paras 7 and 8 of his affidavit (P8) affirmed on 9 February 1989 as follows:

    All my instructions pertaining to the sale of the said property was communicated to my then lawyer AL Looi Esq through the resident director of the said company Mr. Sohaimi Abdul Jalil. The said company accommodated the extensions requested by the caveators on a ‘without prejudice’ basis to enable the caveators to get a bank loan or enter into a joint venture partnership with some other parties to complete the purchase. The resident director of the said company will be in a better position to enlighten this honourable court on what really transpired as he was the one who negotiated with the caveators while taking instructions from the said company culminating in the termination of the said agreement by letter dated 12 December 1988.

    Sohaimi clearly is the only person who could give the court a firsthand account of all the negotiations between the defendants and the plaintiffs. He seems to be the only one who could deny on oath the allegations made by the plaintiffs. Refer to the cases of Seth Maganmal v Darbarilal Chowdhry [1928] PC 39 and Guthrie Sdn Bhd v Trans-Malaysian Leasing Corp Bhd [1991] 1 MLJ 33.

44. On weighing the evidence very carefully this court would hold that an adverse inference ought to be drawn against the defendants and the court does, in that had their resident director Mr. Sohaimi been called to give evidence, his evidence would have been unfavourable to the defendants.

45. Apart from DW1, the other witness for the defendants was DW2 Thean Bee Lean. She stated that she was the executive director of the second defendant company in 1984. But what the court gathers from her evidence is that she was at all material times residing in Australia and only used to return to Singapore two or three times a year apart from her attendance at board meetings in Singapore once a year. She depended on Mr. Sohaimi to give her information pertaining to the affairs of the second defendant. Although she claimed that neither she nor Mr. Sohaimi had any power to grant extensions to the plaintiffs, nevertheless a series of extensions were given either expressly or impliedly to the plaintiffs by the defendants.

46. She admitted that apart from what was conveyed to her by Mr. Sohaimi, she had no personal knowledge as to what transpired between Mr. Sohaimi acting on behalf of the second defendant company and PW1. DW2 also admitted that Mr. Sohaimi was authorized to negotiate with PW1.

47. DW2 was not in a position to testify whether DW1 had given any oral promise to PW1 in regard to the loan or joint venture as she was not present when the promise was made.

48. On the evidence viewed in totality I am satisfied that the plaintiffs have made out a case to merit an order for specific performance. A court of equity enforces specific performance of a contract affecting land because it acts upon the equities caused by the acts of the parties in the execution of the contract and not upon the contract itself.

49. The defendants by their indulgence in granting the plaintiffs a series of extensions to complete the terms of the agreement have lulled the plaintiffs into a false sense of security and have given the plaintiffs reason to believe that they would be given a reasonable time within which to complete the contract. It would be inequitable, in view of the dealings which had taken place between the parties, to allow the defendants to enforce their strict legal rights against the plaintiffs after they have led the plaintiffs to believe that they had no intention to enforce such rights.

50. The plaintiffs are accordingly entitled to an order for specific performance of the sale and purchase agreement dated 20 August 1984, with damages to be assessed and paid by the second defendant to the plaintiffs for wrongful termination of the agreement and by both defendants for breaches of their undertakings with costs.

51. Within three weeks from the date of this order, the second defendant shall deposit the issue document of title of the land, i.e. Grant 17259 for Lot 295, District of Johore Bahru, and the relevant current quit rent and assessment receipts with the senior assistant registrar of this court. 

52. From the date of such deposit, the plaintiffs shall, within six months, or in the event of an appeal such extended period as the appellate court may allow, pay the balance of the purchase price in the sum of $43,145,962.20 to the senior assistant registrar of this court who shall sign the transfer of the said land and the adjudication form and other relevant documents on behalf of the second defendant to convey a good title to the plaintiffs free from all encumbrances and shall forthwith deliver the said transfer, the said Grant 17259 and the said documents to the solicitors for the plaintiffs. The second defendant shall forthwith deliver vacant possession of the land to the plaintiffs on payment of the balance as aforesaid.

53. The Registrar of Titles, Johore, and any other proper registering authority are hereby directed and ordered to register the said transfer forthwith in favour of the plaintiffs, Plenitude Holdings Sdn Bhd. as proprietors, free of all caveats, liens, charges, prohibitory orders, and other encumbrances.

54. The costs of this action are to be paid by both the defendants.

55. Plaintiffs’ claims allowed.

12 MAY 1993

Judgment

P.S. Gill J

56. This application is concerned with the jurisdiction of a judge to alter and vary a judgment, regularly obtained, drawn up, perfected, and affirmed by the Supreme Court.

57. The brief facts of the case are that by a sale and purchase agreement dated 20 August 1984 the second defendant, Rumah Nanas Estate Sdn Bhd, agreed to sell to the plaintiff, Plenitude Holdings Sdn Bhd, a piece of estate land at a price of RM47,939,958. The plaintiff paid a deposit of RM4,793,995.80 but failed to pay the balance sum within the stipulated period of the contract, or within the extended completion period. The second defendant then terminated the said agreement and forfeited the said deposit.

58. After having heard all the evidence I came to the conclusion that the termination of the contract by the second defendant was not valid and ordered specific performance of the contract for the sale and purchase of the land in question [see [1992] 2 MLJ 68]. The second defendant appealed against my judgment and the Supreme Court dismissed the second defendant’s appeal and affirmed my judgment [see [1993] 1 MLJ 113].

59. Subsequently, the plaintiff paid the sum of RM43,145,962.20 being the balance of the purchase price to the second defendant and obtained a valid and legal title to the land in question.

60. On 17 February l993, the second defendant filed an application by way of summons-in-chambers seeking an order that for the purpose of the specific performance by the plaintiff of the sale and purchase agreement dated 20 August 1984, the plaintiff should pay to the second defendant in addition to the balance of the purchase price of RM43,145,962.20, a further sum as liquidated damages calculated at RM11,000 per day as expressly provided for in cl 3.4 of the agreement from 21 May 1985 to the date of actual payment.

61. The second defendant had applied for leave by notice of motion to the Supreme Court on 1 December 1992 prior to the hearing of the appeal proper to include a new ground of appeal namely:

    Though the learned judge ordered the agreement of sale and purchase dated 20 August 1984 between the plaintiffs as purchasers and the second defendants as vendors to be specifically performed in respect of the said land, he failed to expressly order the plaintiffs to comply with clause 3.3 of the said agreement and pay to the second defendants the sum of RM11,000 per day as payment of liquidated damages to be calculated on the balance purchase price of RM43,145,962.20 from 20 August 1985 to the date of actual payment.

62. The said application to include this fresh ground of appeal was dismissed by the Supreme Court prior to the hearing of the appeal proper. 

63. In the trial proper before me in February 1992, the second defendant did not at any time raise the issue of a claim of RM11,000 liquidated damages per day in its pleadings, and it also did not file a counterclaim in the suit. During the hearing of the trial no question was asked by the second defendant’s counsel in regard to this particular claim, and neither did counsel for the second defendant raise the matter in his submission.

64. However, counsel for the second defendant submitted in support of this motion that in an order for specific performance of a contract for sale of land, the contract continues to exist, and is not merged in the order of the court. As such the court is seised of the matter until the contract is fully and finally completed. Counsel for the second defendant also submitted that the provision for liquidated damages was part and parcel of the agreement and by obtaining an order for specific performance, the plaintiff had agreed to fulfil all the obligations under the terms of the agreement, including the claim relating to liquidated damages.

65. Counsel for the second defendant submitted some authorities in support of his proposition of the law. With respect the facts in the authorities submitted are not similar to those in the present case, more so, where an order for specific performance had been perfected after the conclusion of the trial and affirmed by the Supreme Court.

66. Counsel for the plaintiff submitted that the second defendant’s application amounts to a new claim in the same suit where judgment had already been given by the High Court and affirmed by the Supreme Court in the plaintiff’s favour. Furthermore, the second defendant at no time since proceedings were commenced in this matter in the High Court ever raise the issue of the claim for liquidated damages relating to cl 3.4 of the agreement for sale, at the trial, either expressly or impliedly. Counsel for the plaintiff also submitted that the principle of res judicata applied and the second defendant was estopped from making the same or any claim under the present suit as the claim for liquidated damages under cl 3.4 of the agreement should have been raised at the trial by the second defendant in its pleadings. Lastly, he submitted that the present application by the second defendant in effect amounts to a review of the decision made by the trial court and the Supreme Court, and that I am functus officio in respect of the present application.

67. In the case of Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581; [1975] 2 WLR 690; 119 SJ 273 Lord Kilbrandon in delivering the judgment of the court said in regard to the doctrine of res judicata at p 590 as follows:

    But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings. The locus classicus of that aspect of res judicata is the judgment of Wigram VC in Henderson v Henderson (1843) 3 Hare 100, 115 where the judge says:  .... where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under certain circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence,  or even accident, omitted part of their case. This plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.

68. In Carl-Zeiss-Stiftung v Rayner & Keeler Ltd [1966] 2 All ER 536,2 Lord Guest, after stating that the principle of res judicata has developed so as to extend to what is now described as ‘issue’, said at p 565:

    The requirements of issue estoppel still remain (i) that the same question has been decided; (ii) that the judicial decision which is said to create the estoppel was final; and (iii) that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

69. In the case of Superintendent of Pudu Prison v Sim Kie Chon [1986] 1 MLJ 494, Abdoolcader SCJ in delivering the judgment of the Supreme Court in his judgment stated that:

    where res judicata is not strictly established or where estoppel per rem judicatam has not been sufficiently pleaded, or made out, but nevertheless the circumstances are such as to render any re-agitation of the questions formerly adjudicated upon, a scandal, and an abuse, the court would not hesitate to dismiss the action.

70. In regard to this application and upon examining the pleadings in the civil suit 22–32–89, filed in the High Court at Johor Bahru, and having heard the submissions of counsel for the second defendant in that suit, no satisfactory explanation was given why the issue of liquidated damages relating to cl 3.4 of the agreement was not raised at the trial. The second defendant offered no reason why it could not with reasonable diligence have claimed at the trial of the civil suit, the relief it was claiming against the plaintiffs now in this application.

71. On the evidence before me it is abundantly clear that the second defendant knew of its right to make a claim in regard to liquidated damages relating to cl 3.4 of the agreement prior to, and at the trial, but for reasons best known to the second defendant, it chose to remain silent on this issue.

72. In regard to the submissions by learned counsel for the second defendant that the court has the jurisdiction to allow the application by the second defendant, it must be borne in mind that in the present case, apart from the reasons given above, this court is ‘functus officio’ once judgment on the merits of the case had been pronounced and the order perfected. In the instant case the Supreme Court had affirmed the judgment of the High Court and the order of the Supreme Court has been drawn up, perfected and agreed to by all parties concerned. See the case of Hock Hua Bank Bhd v Sahari Murid [1981] 1 MLJ 143 and Emar Sdn Bhd v Aidigi Sdn Bhd [1992] 2 MLJ 734.

73. Accordingly the application of the second defendant is dismissed with costs.

25 MARCH 1994

Judgment

PS Gill J

74. This application for assessment of damages is being made pursuant to an order made by me in my judgment delivered at the conclusion of the trial. The brief facts of the case are that by a sale and purchase agreement dated 20 August 1984, the second defendant, Rumah Nanas Estate Sdn Bhd, agreed to sell to the plaintiffs, Plenitude Holdings Sdn Bhd, a piece of estate land at a price of RM47,939,958. The plaintiffs paid a deposit of RM4,793,995.80 but failed to pay the balance sum within the stipulated period of the contract, or within the extended completion period. The second defendant then terminated the said agreement and forfeited the said deposit.

75. Having heard all the evidence, I came to the conclusion that the termination of the contract by the second defendant was not valid and ordered specific performance of the contract for the sale and purchase of the land in question. [See [1992] 2 MLJ 68.] The defendants appealed against my judgment and the Supreme Court dismissed the defendants’ appeal and affirmed my judgment. [See [1993] 1 MLJ 113.]

76. In my judgment, I held that the first defendant, of his own volition and acting for and on behalf of the second defendant, had promised to secure a loan for the plaintiffs and that in the event that such a loan was not secured, the first defendant had given an undertaking that the defendants would join the plaintiffs in a joint venture scheme to develop the land. The court granted the plaintiffs the remedy of specific performance of the sale and purchase agreement with the damages to be assessed and paid for by the defendants to the plaintiffs, for wrongful termination of the agreement and for breaches of their undertakings with costs. For easy reference, the relevant order of the court dated 8 April 1993 reads as follows: 

    (5)	The second defendant shall pay to the plaintiffs damages to be assessed for wrongful termination of the said agreement dated 20 August 1984 with costs.
    (6)	The first and second defendants shall pay to the plaintiffs damages to be assessed for breaches of their undertakings with costs.

77. The consequences of a breach of contract are governed by s 74 of the Contracts Act 1950 which states as follows:

    (1)	When a contract has been broken, the party who suffers by the breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from the breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.
    (2)	Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

78. Any loss of profit normally to be expected which the developer would otherwise have earned, but for the breach and delay caused, is an allowable claim under the rule in Hadley v Baxendale [1854] 9 Ex 341.

79. The plaintiffs claim that their loss of profit and damages arose out of and were directly caused by the breaches of undertakings by both the defendants. As such, the defendants knew of the consequences of the breach of contract as they were fully aware that the plaintiffs had purchased the land for the purpose of development.

80. At this trial, the plaintiffs called Mr. Wong Chap Fah as their witness. He had also filed two affidavits dated 28 April 1993 and 22 June 1993. The defendants also filed an affidavit denying that they were liable for the claims made against them. Their affidavit was sworn by a director of the company, Madam Rahmah Jaafar and it was dated 17 June 1993. Apart from the affidavits filed by the defendants, the defendants called two witnesses, namely, Ms Lim Wooi Hwee and Mr. K Parampathy.

81. The plaintiffs’ claim for damages is for wrongful termination of the agreement, breaches of undertaking, loss of profit on the housing project, and interest on the deposit of RM4,793,995.80. This amount was the 10% deposit paid by the plaintiffs to the second defendant towards the purchase price of the land in question.

82. In regard to the claim under wrongful termination of the agreement, I would allow the following items on the ground that the plaintiff has submitted sufficient proof by submitting the relevant invoices.

    Fees payable to the following: (i) Ling & Wong Perunding Sdn Bhd amounting to RM31,000; and (ii) Jurukur Selatan amounting to RM31,783.50.

    I disallow all claims in regard to the following items:

    (iv)	[fees payable to] Lim & Hooi amounting to RM22,500;
    (v)	costs paid to Gulam & Wong amounting to RM348,651; and
    (vi)	outstanding costs payable to Gulam & Wong amounting to RM700,000.

83. I now deal with the plaintiffs’ claim under the heading of ‘Breaches of undertakings’. The principal claim under this category is a claim for loss of profit on the housing project.

84. It must be borne in mind that the court made a finding of fact at the conclusion of the trial that the first defendant had promised to secure a loan for the plaintiffs and in the event such a loan was not secured, the first defendant had given an undertaking that the defendants would joint the plaintiffs in a joint venture scheme to develop the said land.

85. The plaintiffs allege that as a result of the undertaking by the first defendant and the failure of the defendants as a whole to either secure a loan for the plaintiffs or enter into a joint venture scheme with the plaintiffs, the plaintiffs have suffered a loss of profit on the housing project.

86. It is reasonable to assume that the defendants were aware of the fact that by not honouring their undertakings, the plaintiffs would be unable to proceed with the development of the land and thereby suffer loss of profit on the proposed housing project.

87. In regard to the quantum of damages, the plaintiffs’ witness, Mr. Song Chap Fah (PW1), stated in his evidence that the housing project involved the construction of houses on the 1,000 acres of land that the plaintiffs had contracted to purchase from the second defendant. The housing project was to be named Pekan Yayasan. The land was projected to develop into five phases comprising 11,547 housing units of various types, as well as sales of land for industrial purposes. In pursuance of their intention to develop the said land, the plaintiffs had obtained the services of various persons, such as surveyors, engineers, project managers, and other technical personnel in order to prepare for the conversion, sub-division and the preparation of the layout plan of the said land in question.

88. The final layout plan was approved in 1987. The plaintiffs genuinely proceeded with their plan to develop the said land on the strength of the undertakings given by the defendants. This fact was not denied by the defendants. PW1 was undoubtedly a competent and an experienced witness to give evidence on behalf of the plaintiffs. PW1 stated that in 1987, the necessary approvals were obtained for the development of the land into a housing scheme. He also stated that 1987 was the perfect time to embark on development of the land into a housing scheme.

89. Sometime in the middle of 1987, the plaintiffs and the defendants after some discussions, agreed to implement a joint venture scheme between the respective parties. The plaintiffs would hold a 10% share in that scheme and the defendants would hold a 90% share.

90. As the plaintiffs had a 10% share in the joint development scheme with the defendants, the profits derived from the scheme would accordingly be 10% of the total gross profit before tax. PW1 stated that the total sales revenue projected by him was RM645,935,000. The total expenditure projected was RM421,625,000 and the gross profit before tax would amount to RM224,300,000. The plaintiffs’ share of the profit would amount to 10% x RM224,300,000 or RM22,430,000. 

91. The defendants called a witness, Lim Wooi Hwee (DW1). She stated that she was a certified public accountant and was attached to a firm of accountants since 1979. She had prepared a report in regard to her findings which was marked as D4. In her evidence and her report, she stated that if the project had commenced in 1988, the profit of the plaintiffs would be RM15,797,000 and this would be the loss of profit of the plaintiffs.

92. Before the court comes to any definite conclusion as to the veracity and reliability of the evidence given by PW1 and DW1, it is appropriate to examine the reasons given by the two witnesses for their respective conclusions.

93. PW1 stated that apart from being a certified accountant, he was also a cost accountant familiar with the accounts and financial position of the plaintiffs’ company, and had prepared the financial papers himself in 1989. Apart from being an accountant, he also had considerable experience in the housing industry. He had been involved in a large housing project named Taman Skudai Baru in Johor Bahru for a period of four years prior to 1989. This project involved about 840 units. PW1 had relied on his experience and personal knowledge in preparing his reports, apart from the fact that he was in Johor Bahru for a large number of years prior to 1989, and therefore had ample opportunity to have a firsthand knowledge of the conditions prevailing in the housing industry.

94. DW1 stated in her evidence that she was a certified accountant having assisted receivers and managers in supervising some abandoned housing projects. In Johor, she was involved in the revival of a project named Taman Mewah in Senai. This project involved a total number of 107 units. In preparing her computation and figures regarding the cost and construction of building, DW1 admitted in her evidence that she had no personal knowledge of the construction or building cost and that she had prepared her report on the findings supplied to her by quantity surveyors and architects whose evidence was not before the court. DW1 stated further that she did not go into a very detailed computation, although she claimed that she had adequate time. The report, D4, although claimed to be prepared by DW1, was signed by the firm.

95. DW1 had also assumed that the plaintiffs suffered a loss due to the delay in the commencement of the project. She failed to base her report on the fact that the plaintiffs were claiming damages for breaches of undertakings on the part of the defendants as stated in the order of the court referred to earlier.

96. DW1 used what she referred to as a ‘comparison’ approach. According to her, if the project had commenced in 1993, then the plaintiffs’ profits would have been higher than if the project had commenced in 1988. As such, the plaintiffs would not have suffered any loss.

97. This ‘comparison’ approach is not without flaws for the following reasons. DW1 admitted under cross-examination that there was no reason for the plaintiffs to delay the commencement of the project from 1988 to 1993. She also stated that she was not saying that the project, if delayed until 1993, would have earned better profits. She admitted in her evidence that all projections are not precise. If there was a recession, the profit would be less, and if there is a civil unrest the property market would collapse, thereby causing the plaintiffs financial disaster. In making her computation for 1993 DW1 assumed that the cost of building the houses remained constant for eight years without taking into account the increase in building costs. She admitted in evidence that she did not adjust her calculation in regard to the increase in the cost.

98. The comparison approach adopted by DW1 is an attractive argument, but no consideration was given to the fact that between 1993 and 2001, there could be many fluctuating market conditions that may well render the project a failure financially.

99. Both PW1 and DW1 admit that there would be a valid claim by the plaintiffs for loss of profit if the project had commenced in 1988. They differ only in the amount of profit. Notwithstanding the fact that both PW1 and DW1 gave evidence that there would be a valid claim by the plaintiffs for loss of profit if the project commenced in 1988, in terms of experience, PW1 had more practical experience of the housing industry than DW1. Having seen and heard both PW1 and DW1 giving evidence in court, I prefer the testimony of PW1 to that of DW1, although in my assessment of his evidence, I have made some allowances for errors in the estimated profit.

100. The court is entitled to consider the fact of loss of profit suffered by a party to a contract in suitable circumstances. This principle of law was illustrated amply in the recent case of Bank Bumiputra Malaysia Bhd Kuala Terengganu v Mae Perkayuan Sdn Bhd [1993] 2 MLJ 76. In this case, the respondent had obtained overdraft facilities from the appellant for the purpose of a bridging loan in order to develop a certain piece of land in Dungun, Terengganu, and also to purchase a certain piece of land in Alor Gajah, Malacca. The appellant withdrew these loan facilities and sued the respondent for the payment of outstanding moneys due to the bank. The respondent counterclaimed for breach of contract and damages.

101. In the course of the hearing of the Bank Bumiputra case, the respondent adduced evidence to show that in the Dungun project, the respondent would have made a certain amount of profit, and the court assessed the amount of profit at RM5,394,722. The court also held that on the facts and evidence, the loss of profits which the first respondent would suffer on the Dungun project was a natural and probable result of the appellant’s breach of contract. The court held that it was clear that at the time of entering into the loan contract with the first respondent, the appellant knew of the loss which would be incurred by the first respondent should the bank breach the contract.

102. In the instant case, the facts are somewhat similar to the Bank Bumiputra case. The defendants knew at the time the contract was executed that if there was a breach of contract and they did not honour their undertakings, the plaintiffs would suffer a loss, as the land had been purchased with a view to developing it into a housing project. The loss suffered by the plaintiffs was a natural and probable result of the defendant’s breach of the contract.

103. I do have to bear in mind that in the Bank Bumiputra case, the project was already in progress when the loan was stopped, and in the present case it was not so. The commencement of the project depended entirely on the first defendant who was to provide the loan, and the profits expected were projections which may or may not have adversely affected the anticipated profits. Therefore this factor should be borne in mind in my assessment of the damages.

104. There have been two different computations in regard to the loss of profits made by PW1 and DW1. Taking all factors into consideration, I take an average of the two figures relating to the loss of profits on the basis that the project started in 1987/88. The average of the two figures relating to the loss of profits amounts to RM19,113,500. However, there could be adverse conditions affecting the anticipated profits and a deduction of a reasonable percentage of 30% should be applied to the sum which is thereby reduced to a round figure of RM13.5m. I accordingly award the plaintiffs a sum of RM13.5m as damages for loss of profits.

105. The next item of loss claimed by the plaintiffs is loss of opportunity cost. Both PW1 and DW1 agreed that it was reasonable to assume that there was an increase in the value of property in regard to this item. In regard to cash flow investment, both PW1 and DW1 agreed that there was such a loss. PW1 had stated that the loss would amount to RM1,410,900, whereas DW1 stated that it would amount to RM325,028. In the circumstances, the average of the two figures would amount to RM867,969. I would therefore allow the sum of RM867,969 in regard to the item of loss suffered in regard to cash flow investment. On the evidence before me there is no basis for the other claim under the heading of loss of opportunity cost of RM2,869,300. I accordingly disallow this item.

106. In regard to the claim of future profit, this really amounts to a claim for exemplary damages against the defendants. The principles for an award of exemplary damages appear in the case of Rookes v Barnard [1964] AC 1129; [1964] 1 All ER 367; [1964] 2 WLR 269. In the instant case, the plaintiffs have not established their claim in accordance with these principles. I therefore disallow the claim for RM5m.

107. The plaintiffs also made a claim for interest on the amount of RM4,793,995.80. This amount was the 10% deposit paid by the plaintiffs to the defendants in compliance with the terms and conditions of the agreement for sale. It was argued by the plaintiffs’ counsel that the defendant had terminated the agreement without any legal basis, and this was so held by the court. As such, the plaintiffs had been denied the use of that sum of money. It was further argued that the second defendant had the use of the money since 20 August 1984 until 31 December 1992 and the forfeiture of the said money by the defendants was unjustified. The defendants by wrongfully terminating the agreement must in all fairness compensate the plaintiffs. The plaintiffs claim 8%pa interest on the 10% of the purchase price of the land paid to the defendants on 20 August 1984 (date of the agreement) to 31 December 1992 (when the plaintiffs paid the balance of the purchase price). However, I hold that the plaintiffs’ claim for interest of 8%pa on the 10% of the purchase price should commence from the date the agreement was wrongfully terminated, i.e. 12 December 1988, till the balance of the purchase price was paid by the plaintiffs to the defendants on 31 December 1992. This figure amounts to RM2,279,290.52 arrived at as follows:

     Deposit of RM4,793,995.80 paid on 20 August 1984.  Date of termination: 12 December 1988.  Calculation of interest at 8%pa. Principal Interest Total 12 Dec 1988 4,793,995.80 383,519.66 5,177,515.46 12 Dec 1989 5,177,515.46 414,201.23 5,591,716.69 12 Dec 1990 5,591,716.69 447,337.33 6,039,054.02 12 Dec 1991 6,039,054.02 483,124.32 6,552,178.34 12 Dec 1992 6,552,178.34 521,774.26 7,043,952.60 31 Dec 1992 7,043,952.60 29,333.72 7,073,286.32 The total interest (7,073,286.32 - 4,793,995.80) = 2,279,290.52.

     I would accordingly allow damages under this item for the sum of RM2,279,290.52.

108. The defendants also called DW2 who is a chartered valuation surveyor. The gist of his evidence is that the value of the said land in 1988 was RM54m, and the present day value of the land is RM120m. He also submitted a report marked D6. Counsel for the defendants submitted that as such, the plaintiffs would have made a profit beyond the amount claimed by them by way of damages. He was shown a document D5 which stated that the valuation of the land by the Government in 1993 was RM67m. DW2 in his report, D6, at p 2 stated categorically that he based his open market value of the land in question on the following assumptions that: 

     1. [there was] a willing seller and a willing buyer dealing at arm’s length; 

     2. [there was] a reasonable period within which to negotiate the sale, taking into account the nature of the property and the state of the market; 

     3. values will remain static throughout the period of negotiation of sale; 

     4. the property will be freely exposed to the market; and 

     5. no account is to be taken of an additional bid by a special purchaser.

109. It is my view that the evidence of DW2 is based on a series of assumptions. Therefore, there is no degree of certainty that the value of the land stated by him can be arrived at on a reasonable and factual basis. When a witness starts to assume certain facts to be prerequisite before arriving at a conclusion, then his evidence cannot be accepted on the basis that it is reasonable and credible.

110. First of all, is there any credible evidence on record that there is a willing buyer for the said land? We are not discussing the sale of a small parcel of land, but that of a large parcel of land, amounting to 1,000 acres. No evidence was adduced by the defendants that there was a ready or prospective purchaser of the said land for a price of RM120m.

111. DW2 went on to state that he also assumed that values would have to be static throughout the period of negotiation for the sale of the land. Again, this assumption by him is not without a flaw. What if the value of land is reduced drastically due to circumstances and market conditions. Again, DW2 bases his opinion on the sale of certain pieces of land in 1991, namely, items 3 and 4 of Sch III of his report, D6. The market conditions could vary in August 1993 by the time DW2 gave evidence in court.

112. It is admitted that the value of the said land would have appreciated between 1984 and 1992, but there is no cogent evidence before the court as to the actual extent of the increase in the value of the said land. That leaves the court to speculate on the increased value of the land. To do so would be totally unsatisfactory, bearing in mind that there was no evidence before the court of the fact that there were any prospective purchasers of the said land. Therefore, in conclusion, I wish to state that the defendants’ submission that the increase in the value of the said land would offset any damages suffered by the plaintiffs is not supported conclusively by the evidence of DW2 for reasons mentioned above.

113. It must be borne in mind that the plaintiffs purchased the piece of land for the purpose of development, and not for sale. This has been made clear in the argument made by the plaintiffs and the defendants.

114. In any event, the defendants are inconsistent in their stand. Having stated that if the plaintiffs had developed the land in 1993, it would be profitable for the plaintiffs, they also state that the plaintiffs could also sell that land to offset loss of profits. This shows that the defendants themselves are uncertain as to what course of action the plaintiffs should take.

115. Lastly, I award in favour of the plaintiffs interest at the rate of 5%pa on all the awards of damages (except for the sum of RM2,279,290.52) for a period from the date of service of the writ until the date of judgment under s 11 of the Civil Law Act 1956 and thereafter at the rate of 8%pa until satisfaction under O 42 r 12 of the Rules of the High Court 1980.

116. I also award in favour of the plaintiffs the costs of the action to be taxed by the senior assistant registrar in default of agreement between the parties.

Cases

Tan Chong and Sons Motor Co (Sdn) Bhd v Alan McKnight [1983] 1 MLJ 220; Synn Lee & Co Ltd v Bank of China [1962] MLJ 395; Munusamy v PP [1987] 1 MLJ 492; WJ Alan & Co Ltd v El Nasr Export & Import Co [1972] 2 All ER 127; [1972] 2 QB 189; [1972] 2 WLR 800; Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319; Webb v Hughes [1870] LR 10 Eq 281; Stickney v Keeble [1915] AC 386; Tilley v Thomas [1867] LR 3 Ch App 61; Wong Kup Sing v Jeram Rubber Estates Ltd [1969] 1 MLJ 245; Seth Maganmal v Darbarilal Chowdhry AIR [1928] PC 39; Guthrie Sdn Bhd v Trans-Malaysian Leasing Corp Bhd [1991] 1 MLJ 33; Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581; [1975] 2 WLR 690; 119 SJ 273; Carl-Zeiss-Stiftung v Rayner & Keeler Ltd (No 2) [1966] 2 All ER 536; [1966] 3 WLR 125; Superintendent of Pudu Prison v Sim Kie Chon [1986] 1 MLJ 494; Hock Hua Bank Bhd v Sahari Murid [1981] 1 MLJ 143; Emar Sdn Bhd (under receivership) v Aidigi Sdn Bhd [1992] 2 MLJ 734; Hadley v Baxendale [1854] 9 Ex 341; Bank Bumiputra Malaysia Bhd Kuala Terengganu v Mae Perkayuan Sdn Bhd [1993] 2 MLJ 76; Rookes v Barnard [1964] AC 1129; [1964] 1 All ER 367; [1964] 2 WLR 269

Legislations

Evidence Act 1950: s.92, s. 114(g)

Contracts Act 1950: s.74

Representations

KF Wong (FF Lee with him) (Gulam & Wong) for the plaintiffs.

Raja Aziz Addruse (Upali Masacorale and Robert PF Lai with him) (Jackson & Masacorale) for the defendants.

Notes:-

The first decision is also reported at [1992] 2 MLJ 68; second decision, at [1993] 2 MLJ 469; and last decision, at [1994] 2 MLJ 273.