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[2000] Part 4 Case 2 [HCM] |
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www.ipsofactoJ.com/highcourt/index.htm
[2000] Part 4 Case 2 [HCM] |
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HIGH COURT OF MALAYA |
Ng
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vs -
Foo
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Coram HG KANG J |
8 APRIL 2000 |
Judgment
HG
Kang, J
This
suit arose from the conveyance of two adjoining shop lots which the parties
had purchased from a common seller.
The
plaintiffs contended that a common mistake had occurred in the conveyance of
the respective land which had resulted in the defendants becoming the
registered proprietor of the land on the shop purchased by the plaintiffs
and the plaintiffs the registered proprietor of the land on the shop
purchased by the defendants.
It
is common ground that before the sale of the properties,
the
second plaintiff was occupying the shop with the address, No 9 Tingkat
Kledang 14, Taman Kledang, 31450 lpoh Perak which stood on land held
under HS (D) Ka 6792/79 PT 18177, as a tenant of a company called Hung
Chun Sdn Bhd. He operated a provision shop on this lot.
the
first defendant was occupying the shop with the address, No 11 Tingkat
Kledang 14, Taman Kledang, 31450 lpoh Perak which stood on land held
under HS (D) Ka 6793/79 PT 18178, also as a tenant of Hung Chun Sdn Bhd.
the
first defendant operated a mini market at their own shop at No 7 Tingkat
Kledang 14 which adjoined shop No 9.
Both
the first plaintiff and the second defendant were uninvolved parties in this
action. They were cited as parties only because they became co-proprietors
in the conveyance of the respective property now in dispute.
The
plaintiffs commenced this action seeking (in the translated form as it
appears in the written submission of counsel for the plaintiffs):
a
declaration that the names of the plaintiffs as registered in the
memorial of the Registered Document of Title for land held under HS (D)
KA 39024 (formerly known as HS (D) KA 6793/79) for lot PT 18178, in the
Mukim of Ulu Kinta, Perak (the first land) be cancelled by the Registrar
of Land Titles Perak. And in turn their names be registered in the
documents of title for land held under HS (D) KA 39023 (formerly known
as HS (D) KA 6792/79 for lot PT 18177), Mukim of Ulu Kinta, Perak (the
second land);
a
declaration that the names of the defendants as registered in the
memorial of the Registered Document of Titles for the second Land be cancelled by the Registrar of Title and in turn their
names be registered in the Registered Document of Titles for the First
land.
The
two prayers appear to have suffered from inapt drafting. It is evident that
one does not seek a declaration to cancel a memorial in
the register document of title. Rather, the prayer should first seek
a declaration that there was a mutual mistake in the conveyance of the two
lots of properties which resulted in the incorrect memorial being entered in
the register document of title and issue
document of title with respect to the proprietorship of the
respective property - to be followed by an ancillary prayer for an order
that the Registrar of Titles be directed to rectify the register and issue
documents of title accordingly.
However,
the intention of the plaintiffs in this suit is not incomprehensible and
therefore not in vain. It is clear that they are seeking the rectification
of the mistake in the conveyance of the two lots of properties, the facts of
which I shall now set out in greater detail.
HOW
IT ALL STARTED
The
Managing Director of Hung Chun Sdn Bhd (the landlord of shops No 9 and 11)
was a Mr. Yee Weng Thong. According to Mr. Yee the first defendant
approached him offering to buy over the shop No 11 of which he was the
tenant at the time and also the adjoining shop No 9 which was occupied by
the plaintiffs.
Mr.
Yee replied that he was willing to sell both the shops if the price was
right. But in respect of the shop No 9 which was being tenanted to the
second plaintiff he told the first defendant that as a matter of principle
he would have to offer it to the second plaintiff first. He would only sell
shop No 9 to the first defendant if the second plaintiff would not buy it.
As
it turned out the second plaintiff wanted to purchase the shop. Mr. Yee then
informed the first defendant of the second plaintiffs intention and said
that he could sell only shop No 11 to him. The other shop No 9 would have to
be sold to the second plaintiff. The first defendant agreed.
Later
he took both the second plaintiff and the first defendant to see the
solicitor. He told the solicitor that shop No 9 was to be sold to the second
plaintiff and shop No 11 to the first defendant.
He
gave the solicitor a photo copy of the title deed of the respective lot on
which he had by error marked No 9 on the copy of the title deed No 6793/79
and No 11 on the title deed No 6792/79. The correct marking should have been
the reverse - No 9 on title deed 6792/79 and No 11 on title deed 6793/79.
The
signing of the agreement took place one or two weeks later at the
solicitor's office. The solicitor explained to both the second plaintiff and
the first defendant the contents of the respective agreement which they
subsequently proceeded to sign on.
Some
six months later the second plaintiff came to see him to complain that he
had been wrongly given the title deed for shop No 11 whereas he had actually
purchased from him shop No 9. Mr. Yee said he then tried to settle the
matter amicably by requesting the parties to rectify the mistake through the
solicitor. The defendants refused.
The
upstairs portion of both the lots were let out to tenants before the sale.
After the sale the plaintiffs collected rental from the tenant of shop No 9
and the defendants from the tenant of shop No 11, respectively as the new
landlord.
AT
THE OFFICE OF THE SOLICITORS - DATO' DANIEL TAY
The
solicitor who prepared the sale and purchase agreements for the respective
lots and subsequently conveyed them to the respective purchasers was one
Dato' Daniel Tay.
He
gave evidence that sometime before May 11, 1994, Mr. Yee, the second
plaintiff and the first defendant visited him at his office for the purpose
of the conveyance. On the instruction of all the three of them he was to
convey shop No 9 to the plaintiffs and shop No 11 to the defendants.
He
said he had explained to the first defendant in particular, that he was
purchasing shop No 11.
Nevertheless
without so much as admitting to any negligence or mistake on his part he
said he relied on the markings in pencil made by Mr. Yee on the respective
photo copy of the title deed designating No 9 to the second plaintiff and No
11 to first defendant which the latter had handed to him, to prepare the
respective sale and purchase agreements on the basis that -
the
plaintiffs would be purchasing shop No 9 on land held under HS (D) Ka
6793/79 PT 18178.
the
defendants would be purchasing shop No 11 on land held under HS (D) Ka
6792/79 PT 18177.
The
lands were subsequently conveyed to the plaintiffs and the defendants in the
manner as they appear in the respective sale and purchase agreements with
the plaintiff becoming the registered proprietor of HS (D) Ka 6793/79 and
the defendants of HS (D) Ka 6792/79 PT 18177 in the issue document of titles
and the register document of title at the land office.
SOME
MONTHS LATER - THE DISAGREEMENT
According
to the second plaintiff Lim Suan Tian, he had all along since 1983 been
occupying shop No 9 where he operated his sundry shop as a tenant of the
Hung Chun Sdn Bhd, the company of which Mr. Yee was a director.
Mr.
Yee went to see him one day to ask him whether he was interested to purchase
the shop he was occupying telling him that if he did not want to buy it,
someone else would want to buy it. He admitted in cross-examination that Mr.
Yee did not disclose to him at the time that the first defendant was the
person who wanted to buy the lot. He told Mr. Yee he needed time to consider
and finally when he decided to buy it, he went over to see Mr. Yee to inform
him that he would be buying shop No 9 jointly with the first plaintiff.
Subsequently,
on May 13, 1994 he, the first plaintiff and Mr. Yee went to the solicitor's
office to sign the sale and purchase agreements. At that office Mr. Yee
handed over two photostat copies of the title deeds and informed the
solicitor that shop No 9 was to be sold to him and shop No 11 to the first
defendant.
Five
or six months later he realised there was a mistake in the conveyance of the
respective lot when he received a notice of assessment from the City Council
for shop No 11 instead of for shop No 9 which he had purchased. After the
purchase he had bought fire insurance for his lot and had been collecting
rental ofRM200 per month from the tenant who occupied the upstairs portion
of the shop.
The
first defendant however denied there was any mistake in the conveyance to
him of shop No 9. He insisted that the correct property had been registered
in his favour - this notwithstanding that the sale and purchase agreement he
entered into with the owner described the shop as No 11.
He
said he had operated his mini market business on shop No 7 which he owned
and had all along wanted to purchase the adjoining shop No 9 in order to
expand his mini market business. In April 1994 he went to look for Mr. Yee
Weng Thong and offered to buy shop No 9 (the shop on which the second
plaintiff was a tenant) as well as shop No 11 (the shop on which he was a
tenant).
He
said Mr. Yee agreed to sell the two lots to him for the price of RM150,000
each but later informed him that he could only sell shop No 11 to him as he
wanted to sell shop No 9 to the plaintiffs. He was unhappy and insisted on
buying shop No 9 which was being occupied by the plaintiffs.
Mr.
Yee then agreed to sell shop No 9 to him at the price of RM156,000 saying he
would sell shop No 11 to the first plaintiff at RM158,000 thereby affording
him a discount of RM2,000 for not being able to sell both the lots to him.
At
the solicitor's office later, Mr. Yee handed over the title deed to the
solicitor Dato' Daniel and informed him that he wanted to sell shop No 9 to
him. A photo copy of the deed was shown to him and no number was written on
it. The second plaintiff was not there at the time. The solicitor explained
to him clearly before he signed the sale and purchase agreement that the
shop he was purchasing was shop No 9 which at the time he knew was being
occupied by the plaintiffs. He said he raised the question of vacant
possession of shop No 9 but the solicitor informed him that the transfer of
the shop to him could be done only after obtaining the Chief Minister's
consent. In any case he had intended to obtain vacant possession of shop No
9 only after the Chinese New Year. This was because he had stocked a lot of
soft drinks at shop No 11 and it would be inconvenient for him to vacate
that shop to enable the plaintiffs to shift into.
He
claimed that he became aware of the error in the shop number in the sale and
purchase agreement he signed with the seller some six months later when the
second plaintiff came to see him to ask him to re-transfer shop No 9 to him.
He had refused as he had bought the correct shop No 9.
Mr.
Yee had also advised him to pay the plaintiffs a compensation of RM2,000 so
as to enable them to take possession of shop No 9 which the plaintiffs were
now occupying to which he had agreed.
He
admitted that he had been collecting rent from the tenant who was occupying
the upstairs portion of shop No 11 until April 1995.
THE
COUNTER-CLAIM
The
defendants have their own grievance. They are not prepared to leave the
matter in status quo whereby the plaintiffs can continue to
occupy the shop which they claimed they had rightfully purchased. They now
seek by way of a counter-claim an order that the plaintiffs deliver up
vacant possession and be liable in mense profit of RM1,000 per month until
possession is delivered up.
THE
LAW
Before
proceeding to consider the evidence, I shall for convenience consider the
law which have to be applied in this case.
An
agreement entered into between the parties under a mutual mistake is void
both at common law and equity in two categories of cases. The first category
encompasses such cases where the subject matter of the contract without the
knowledge of the parties did not exist or had ceased to exist at the time
when they entered into the contract (res extincta). The second
category consists of such analogous case where unknown to the seller the
buyer is already the owner of that which the seller purports to sell him (res
sua).
The
contract has to be void in the first instance because there is nothing for
the parties to enter into a contract if the subject matter is not in
existence; and in the second instance because there is nothing for the
seller to sell if the subject matter had already belonged to the buyer. (See
Cheshire, Fifoot and Furmston's Law of Contract, Second Singapore and
Malaysian Edition by Andrew Phang Boon Leong 1998 edition on the Chapter on
Unenforceable contracts at p 388.)
This English common law principle of contract is grafted into s 21 of the Contracts Act 1950 which provides as follows:
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21. |
Agreement void where both parties are under mistake as to matter of fact |
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Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. |
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Explanation — An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact. |
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ILLUSTRATIONS |
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(a) |
A agrees to sell B a specific cargo of goods supposed to be on its way from England to Kelang. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of the facts. The agreement is void. |
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(b) |
A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void. |
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(c) |
A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void. |
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But
where the subject matter of the contract was not res extincta
or res sua, a party entering into a contract under a mutual
mistake may avail himself of remedies in equity to apply to set aside the
contract on such terms as are just (Cooper v Phibbs [1867] LR 2 HL
149). And where the common mistake is with respect to an entry in a
document, the affected party may bring an action in equity to rectify the
mistake in the document to reflect the real intention of the parties.
As Cozen Hardy MR said in Lovell and Christmas Ltd v Wall [1911] 104 LT 85, 88:
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The essence of rectification is to bring the document which was expressed and intended to be in pursuance of a prior agreement into harmony with that prior agreement. It presupposes a prior contract and it requires proof that by common mistake the final completed instrument as executed fails to give proper effect to the prior contract. For this purpose evidence of what took place prior to the execution of the completed document is obviously admissible and indeed essential. |
The
extent to which the court would be prepared to order rectification is well
illustrated in Craddock Brothers Ltd v Hunt [1923] 2 Ch. 136 wherein
by reason of a mutual mistake made in reducing a verbal agreement into
writing of a sale of a property, a yard was mistakenly included in the
formal and written instrument and was subsequently conveyed to the
purchaser. Rectification of the conveyance was ordered in that case
notwithstanding that it would result in the grant of specific performance in
defiance of the rule that no parole evidence was admissible to vary the
terms of a written contract.
In handing down the decision Warrington LJ went on to set out in detail (at p 159) the principle upon which rectification may be ordered in like cases:
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The jurisdiction of the courts of equity in this respect is to bring the written document executed in pursuance of an antecedent agreement into conformity with that agreement. The conditions to its exercise are that there must be an antecedent contract and the common intention of embodying of giving effect to the whole of that contract by writing, and there must be clear evidence that the document by common mistake failed to embody such contract and either contained provisions not agreed upon or omitted something that was agreed upon, or otherwise departed from its terms. If these conditions are fulfilled then it seems to me on principle that the instrument so rectified should have the same force as if the mistake had not been made, in which case the Statute of Frauds would be no defence to an action founded upon it. |
Here in our jurisdiction the principle is embodied in s 30 of the Specific Relief Act 1950 which provides as follows:
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30. |
Rectification of instruments |
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When, through fraud or a mutual mistake of the parties, a contract or other instrument in writing does not truly express their intention, either party, or his representative in interest, may institute a suit to have the instrument rectified: and if the court find it clearly proved that there has been fraud or mistake in framing the instrument, and ascertain the real intention of the parties in executing the same, the court may in its discretion rectify the instrument so as to express that intention, so far as this can be done without prejudice to rights acquired by third persons in good faith and for value. |
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ILLUSTRATIONS |
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(a) |
A, intending to sell to B his house and one of three godowns adjacent to it, executes a conveyance prepared by B, in which, through B's fraud, all three godowns are included. Of the two godowns, which were fraudulently included, B gives one to C and lets the other to D for a rent, neither C nor D having any knowledge of the fraud. The conveyance may, as against B and C, be rectified so as to exclude from it the godown given to C, but it cannot be rectified so as to affect D's lease. |
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(b) |
By a marriage settlement. A, the father of B, the intended wife, covenants with C, the intended husband, to pay to C, his executors, administrators, and assigns, during's life, an annuity of $5,000. C dies insolvent and the official receiver claims the annuity from A. The court, on finding it clearly proved that the parties always intended that this annuity should be paid as a provision for B and her children, may rectify the settlement and decree that the official receiver has no right to any part of the annuity. |
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The
parties in the instant case however, are not treading on unfamiliar ground.
Although precedents with respect to the rectification of the register
document of title that comes close to the factual matrix of the instant case
are rare, the law had in fact been laid by Gill J (as he then was) some 30
years back in Oh Hiam & Ors v Tham Kong [1967] 1 MLJ 65. In that
case the parties had entered into a contract for the sale and purchase of
certain lands at Gombak but by a mistake common to both the parties the
subsequent conveyance transferred not only the lands agreed to be sold to
the buyer but also another piece of land in Setapak. The transfer was set
aside in that case and rectification of the transfer made pursuant to the
agreement was granted by ordering the defendant to retransfer the Setapak
land back to the plaintiff.
The
judgement also set the law pertaining to the doctrine of indefeasibility
under s 340 of the National Land Code (previously s 42 of
the FMS Land Code) by its ruling that the rules of equity pertaining
to rectification apply to land registered under the National Land Code
notwithstanding that the transferee enjoys indefeasibility of title under
the section, thus settling the very issue raised by counsel for the
defendants in the instant case.
The
judgment of Gill J was reversed on appeal to the Federal Court but was
affirmed both on findings of facts and law on further appeal to the Privy
Council (see [1980] 2 MLJ 159).
WAS
THERE A COMMON MISTAKE?
The extent to which equity was prepared to lend its hand to rectify a document was considered by Denning LJ (as he then was ) in Frederick E Rose (London) Ltd v William H Pim & Co Ltd [1953] 2 QB 450 at p 461:
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In order to get rectification it is necessary to show that the parties were in complete agreement upon the terms of their contract, but by an error wrote them down wrongly; and in this regard, in order to ascertain the terms of their contract, one does not look into the inner minds of the parties - into their intentions - any more than one does in the formation of any other contract. One looks at their outward acts, that is at what they said or wrote to one another in coming to an agreement and then compares it with the document which they have signed. If one can predicate with certainty what the contract was and that it is, by a common mistake wrongly expressed in the document, then one rectifies the document; but nothing less will suffice. |
The
above passage provides the template within which one could go about to
consider the evidence in the instant case.
Having
heard the parties, I am convinced that there was a mistake in the conveyance
of the shop lots to the respective parties in spite of the insistence of the
first defendant that he had intended to purchase shop No 9 and that Mr. Yee
had meant to sell to him only that lot.
I
come to this conclusion because I believe Mr. Yee whose account of the
antecedent that led to the sale and purchase of the shops lends credence to
the second plaintiffs claim. I also believe Dato' Daniel who corroborated
Mr. Yee on this point. Needless to say both Mr. Yee and Dato' Daniel were
independent witnesses who had no reason to take any side.
On
the other hand, the first defendant's claim that he had intended to purchase
only shop No 9 is inconsistent with his inactivity immediately after the
purchase. He had not as he would be expected to, taken any step to obtain
vacant possession of shop No 9 which was being occupied by the plaintiffs.
Neither did he take any step to move out of shop No 11 which he was
occupying in order to allow the plaintiffs to occupy it.
His
conduct after the purchase clearly shows that he had settled on the status
quo before the respective purchase of the lots by the parties - with
him occupying and remaining at shop No 11 and the plaintiffs remaining where
they were at shop No 9 to continue to operate their provision shop. Even
more telling is the fast that he had continued to collect rent from the
tenant of the upstairs portion of shop No 11 well after the purchase,
stopping only after April 1995 after the second plaintiff informed him of
the discrepancy.
In
the event and for the reasons aforesaid, I must so find that the respective
land had been conveyed to the respective purchaser by mistake when the
correct conveyance should have been as follows:
The land described as HS (D) Ka 6792/79 PT 18177 to the plaintiffs.
The
land described as HS (D) Ka 6793/79 PT 18178 to the defendants.
I
must also find for the same reasons that the mistake was mutual to the
plaintiffs and the defendants at the time of the conclusion of the
respective sale and purchase agreements in that the plaintiffs had indeed
intended to purchase shop No 9 and the defendants shop No 11 - although
there was no direct contractual relationship between the plaintiffs and the
defendants, a salient point of law raised by counsel for the defendants
which I shall consider shortly.
A
QUESTION OF PRIVITY
It was submitted that the defendants did not have anything to do with the plaintiffs. His contractual relationship was exclusively with Mr. Yee who represented his company in respect of the sale and purchase of his own shop lot and therefore there was no privity of contract less so a common mistake in the transaction. A rectification of the register document of title under s 30 of the Specific Relief Act 1950, he submitted, can be made only in respect of mistakes common between two contracting parties. He relied on the commentary from The Law of Specific Relief by Dr SC Banerjee 8th Edn 1988 at p 413 with respect to s 26 of the Indian Specific Relief Act 1963 (which was in pari materia with s 30 of our Specific Relief Act 1950):
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"Representative-in-interest"- The expression includes heirs, transferees, executors, administrators, official receivers, official assignees and committee in lunacy. Under this section, the court will interfere only as between the original contracting parties, or those claiming under them in privity. .. Sub-section (1) limits the operation of the section to either party of his representative-in-interest. So, rectification cannot be had by one who is neither a party to the contract nor instrument, nor the representative-in-interest of such a party. |
Counsel for the plaintiffs on the other hand appears to have premised his argument on this issue on the locus standi of his clients to apply for a declaration they are now seeking. He relied on chiefly on the ratio of Abdoolcader J (then co-opted as a member of the panel) in the Federal Court case of Tan Sri Haji Othman Saat v Mohamed Ismail [1982] 2 MLJ 177 wherein at p 178 he said:
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Although it is not necessary for a plaintiff who seeks relief by way of declaratory judgment to show that he has a present cause of action, 'he must be somebody with such an interest in the subject-matter of the action as to justify his seeking relief' [Wilson, Walton International (Offshore Services) Ltd v Tees & Hartlepools Port Authority at p 124]. |
But
locus standi and privity of contract are poles apart. Whereas locus
standi establishes a party's right to appear and sue in a
non-contractual cause of action, privity is concerned strictly with the rule
that a non party cannot bring an action against another in contract. The
rule with respect to the rectification of instruments under s 30 of the
Specific Relief Act 1950 is concerned with "mutual mistakes of the
parties" which could only arise between parties to a contract. It
follows that unless the plaintiffs are able to establish in law that there
is a contractual relationship with the defendants, a rectification of the
register document of title of their property does not arise - an issue which
I shall now consider.
IS
THERE A CONTRACT BETWEEN THE PLAINTIFFS AND THE DEFENDANTS?
It
can be readily appreciated that as between the plaintiffs and the defendants
there was no visible agreement as such as they had in each case entered into
a separate sale and purchase agreements with Hung Chun Sdn Bhd.
But the question whether a contract exists or not between parties has to be judged not by merely what the parties have outwardly intended, but also by what they have said, written or done. As Brian CJ said,
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... the intent of a man cannot be tried, for the Devil himself knows not the intent of man. (Anon 1477 YB 17 Edw 4, fo 1, pl 2.) |
To
do justice, the courts may have to go beyond the immediate inferences that
may be drawn from words and acts and may construct therefrom a contract
between persons who would seem, at first sight not to be in contractual
relationship with each other at all. (See Cheshire Fifoot & Furmston 's
Law of Contract, 12th Edn Constructing a contract at p 28.)
Thus
in Clarke v The Earl of Dunraven and Mount-Earl [1897] AC 59, the
owners of two yachts entered them for the regatta of a yacht club. The rules
of the club to which each of the owner had committed himself by letter to be
bound obliged him to pay 'all damages' caused by fouling. In the course of
the race the defendant fouled the plaintiffs yacht causing her to sink.
Notwithstanding that there was no direct contractual relationship between
the plaintiff and defendant, the plaintiff sued the defendant for damages
contending that by entering the competition in accordance with the rules of
the club a contract had been created between the competitors inter-se
by which they had bound themselves to pay 'all damages'.
The
question that subsequently went before the House of Lords was whether any
contract had been made between the plaintiff and the defendant given that
their immediate contractual relationship were not with themselves but with
the yacht club on an individual basis. It held affirming the decision of the
Court of Appeal, that a contract (collateral to the main one that had been
entered with the yacht club by the participants including the plaintiff and
the defendant) had been created between them as they have accepted the rules
as binding upon them, and therefore the defendant was liable in damages.
In
Shankling Pier Ltd v Detel Products Ltd [1951] 2 All ER 471 the
plaintiff entered into a contract with a company to repair and repaint their
pier. Under this contract the plaintiffs had the right to specify the
materials to be used. The defendants induced the plaintiffs to use a
particular paint made by them giving the plaintiff assurance of its quality.
The company used the paint as specified with unsatisfactory result. On being
sued by the plaintiffs for breach of their undertaking, the defendants
pleaded that there was no contract between the plaintiff and the defendants.
It was held that there was a contract between the plaintiff and the
defendant on the premise that the defendants had guaranteed the suitability
of the paint in return for specifying that the defendants' paint be used by
the company.
(See
also Rayfleld v Hand [1958] 2 All ER 194; Esso Petroleum Ltd v
Customs and Excise Comrs [1976] 1 All ER 117.)
The principle in Clarke v Dunraven is now well established and has been applied and expanded in subsequent cases in England and other common law jurisdictions, including ours. Its scope could not have been better described and explained than in the judgment of Raja Azlan Shah CJ Malaya (as he then was) in Tan Swee Hoe Co Ltd v Ali Hussein Bros [1980] 2 MLJ 16 wherein a number of English judgments were cited in support. Of those that were considered by His Lordship, the speech of Lord Moulton in Heibut, Symonds & Co v Buckleton [1913] AC 30, at 47 is of special relevance to the instant case. This was what he said:
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It is evident, both on principle and on authority, that there may be a contract the consideration for which is the making of another contract. If you will make such and such a contract I will give you one hundred pounds, ' is in every sense of the word a complete legal contract. It is collateral to the main contract, but each has an independent existence, and they do not differ in respect of their possessing to the full the character and status of a contract. |
Tan
Swee Hoe was applied in Kluang Wood
Products Sdn Bhd v Hong Leong Finance Bhd [1994] 4 CLJ 141. In that case
Siti Norma Yaakob J (as she then was) had to decide whether an oral
representation to provide end financing could constitute a
collateral contract that exists side by side with the main contract
of providing a bridging finance to the plaintiff. In the course of her
ruling in that case that the representation amounted to a collateral
warranty it was held that for a collateral contract to exist, the plaintiffs
must show:
that
there must be a representation which was intended by the defendants to
be relied upon;
the
representation induced the signing of the contract; and,
in
the peculiarity of the facts in that case, the representation must
amount to a warranty, existing side by side with it.
A relevant aspect of the doctrine with respect to consideration in a collateral contract was also expressed in Kah Keng Construction Sdn Bhd v Seisin Development Sdn Bhd [1997] 1 CLJ Supp 488 wherein Low Hop Bing J in holding that a collateral contract did not exist in that case said at p 454 that:
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A collateral contract comes into existence prior to or at the time of the conclusion of the main contract. The consideration for the collateral contract is the making of the main contract. |
A confined reading of the cases cited above however, may lead one to conclude that collateral contracts can be legitimately constructed by the courts only in cases where a warranty by one party had induced the other party to enter into a main contract. But the word warranty here merely typifies the conduct deemed sufficient by the courts to support a collateral contract. A collateral contract is founded basically on the representation that a party may have made to the other that may have induced him to enter into the main contract - an environment best described by Lord Denning MR in Dick Bentley Productions, Ltd v Harold Smith (Motors), Ltd [1965] 2 All ER 65, at 57 in a passage which was also relied upon by the Federal Court in Tan Swee Hoe, supra as follows:
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Looking at the cases once more, as we have done so often, it seems to me that if a representation is made in the course of dealings for a contract for the very purpose of inducing the other party to act on it, and it actually induces him to act on it by entering into the contract, that is prima facie ground for inferring that the representation was intended as a warranty. It is necessary to speak of it as being collateral. Suffice it that the representation was intended to be acted on and was in fact acted on. |
A
collateral contract need not therefore be constructed from the same parties
to the main contract, but also where each has on his own contracted with a
common third party. As the two landmark cases of Clarke v Dunraven and
Shankling Pier (supra) had shown, it can be constructed from a
contractual relationship which is common to both the parties - in the
former, the yacht club and in the latter the company employed to paint the
pier.
Now
to recall the antecedent that led to the signing of the sale and purchase
agreements by the plaintiffs and the defendants at the office of the
solicitor Dato' Daniel:
It
is clear that the second plaintiff had agreed to purchase shop No 9 after
being told by Mr. Yee that the first defendant had wanted to purchase the
same lot and that he was being offered the first option to purchase; and the
first defendant had purchased only shop No 11 as the second plaintiff would
be purchasing shop No 9.
From this reciprocal understanding and arrangement one can legitimately conceptualise a contract within the paradigm suggested by Lord Moulton in Heibut Symonds & Co (supra) in the following form:
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If
you buy shop No 9, then I will buy only shop No 11; otherwise I will
buy both shop No 9 and shop No. 11 and, to construct a collateral
contract between the second plaintiff and the first defendant on the
following terms and conditions:
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The
representation and inducement (in the sense described in Kluang Wood
Products (supra) that led to the collateral contract is
self-evident.
With
respect to the representation - it is true the second plaintiff by his own
admission, had not communicated with the first defendant before he decided
to purchase shop No 9 and therefore it could not be said that the first
defendant had represented to him that if he did not buy up his own lot
someone else would buy it. But Mr. Yee did make that representation and
although he did not disclose the name of the first defendant to the second
plaintiff it was clear at that instance that the first defendant was his
undisclosed principal.
With
respect to the inducement, this becomes obvious when the second plaintiff
decided to purchase his lot after telling Mr. Yee he needed time to
consider.
The
consideration in this case would be provided (following Kah Keng
Construction, supra) by the contract that each parties entered
into with Hung Chun Sdn Bhd subsequently to purchase the respective lot.
THE
ORDER
Having
established the existence of the collateral contract, and a common mistake
in the conveyance of the respective lots of properties it follows that the
plaintiffs are entitled to activate the provision of s 30 of the Specific
Reliefs Act 1950 to rectify the respective entry in the register document of
title to express in each case the true intent of the parties.
Let
there be an order that the Registrar or Land Administrator be directed under
s 417 of the National Land Code to make the necessary rectification on the
respective register document of title as well as on the issue document of
title.
Let
the counter-claim of the defendants be dismissed with costs.
Let
the defendants pay the costs of this action.
Cases
Clarke v The Earl of Dunraven and Mount-Earl [1897] AC 59; Cooper v Phibbs
[1867] LR 2 HL 149; Craddock Brothers Ltd v Hunt [1923] 2 Ch 136; Frederick E
Rose (London) Ltd v William H Pim & Co Ltd [1953] 2 QB 450; Heibut, Symonds
& Co v Buckleton [1913] AC 30; Kah Keng Construction Sdn Bhd v Seisin
Development Sdn Bhd [1997] 1 CLJ Supp 488; Kluang Wood Products Sdn Bhd v Hong
Leong Finance Bhd [1994] 4 CLJ 141; Lovell & Christmas Ltd v Wall (1911)104 LT
85; Oh Hiam v Thorn Kong [1967] 1 MLJ 65 (HC); Shankling Pier Ltd v
Detel Products Ltd [1951] 2 All BR 471;
Dick Bentley Productions, Ltd v Harold Smith (Motors), Ltd [1965] 2 All ER 65;
Esso Petroleum Ltd v Customs & Excise Comrs [1976] 1 All ER 117; Oh Hiam v Tham Kong [1980] 2 MLJ 159 (PC); Rayfleld v Hand [1958] 2 All ER 194; Tan
Sri Haji Othman Saat v Mohamed Ismail [1982] 2 MLJ 177; Tan Swee Hoe Co Ltd
v Ali Hussein Bros [1980] 2 MLJ 16.
Legislations
Malaysia
Contracts
Act 1950: s.21
National
Land Code 1965: s.340, s.417
Specific
Relief Act 1950: s.30
India
Specific
Relief Act 1963: s.26
Authors
and other references
Andrew
Phang Boon Leong, Cheshire, Fifoot and Furmston's Law of Contract, 2nd Singapore
and Malaysian Edn, 1998
Cheshire,
Fifoot & Furmston's Law of Contract, 12th Edn
SC Banerjee, The Law of Specific Relief, 8th Edn 1988
Representation
Ng Poh Tat (Ng Poh Tat & Co) for Plaintiffs
Yau Wai Leong (Chan & Associates) for Defendants
Notes:
This decision is also reported at [2000] 3 AMR 2675
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