HIGH COURT OF MALAYA
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www.ipsofactoJ.com/highcourt/index.htm [2003] Part 3 Case 7 [HCM] |
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HIGH COURT OF MALAYA |
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Lim - vs - Lim |
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GY SU JC |
20 FEBRUARY 2003 |
Judgment
GY Su, JC
This is an appeal to the judge in chambers (Encl.71) against the decision of the learned deputy registrar dated October 11, 2001 dismissing the defendants' application (Encl.28) to strike out the plaintiff's statement of claim and defence to counter-claim with costs.
FACTS AND BACKGROUND
The plaintiff's claim against the defendants is for a sum of RM1,425,336.66 together with interest thereon and costs of the action being the balance of charges for services rendered by the plaintiff to the defendants in procuring a purchaser for the defendants in respect of certain properties belonging to the defendants.
The defendants are the beneficial owners of four pieces of land, namely, Lots No 440,441, 803 and 2450, Seksyen 4, Bandar Butterworth, Province Wellesley North held under Grant First Grade No 30871, 30872, 33267 and 55448 ("the said lands").
On December 10, 1999, the plaintiff filed a writ of summons and statement of claim (Encl.2) against the defendants.
PLAINTIFF'S STATEMENT OF CLAIM
In his statement of claim, the plaintiff avers that on July 10, 1996 the defendants gave to the plaintiff and one Ang Chin Huat ("the said Ang Chin Huat") an option ("the said option") to procure a buyer for the said lands from either MCB Group of Companies, OSK Group of Companies or PJD Group of Companies ("the said companies").
In paragraph 3 of the plaintiff's statement of claim, the plaintiff avers that on the same date, the defendants issued a letter of confirmation confirming that a service charge of 4% of the purchase price for the said lands (exclusive of tax) will be paid to the plaintiff and a further 1% of the purchase price (exclusive of tax) will be paid to the said Ang Chin Huat if the two of them being the option holders succeeded in procuring a buyer from the said companies ("the said letter of confirmation").
According to the plaintiff, through the plaintiff's efforts, the said lands were sold to one of the said companies, namely, MCB Eastern Land Sdn Bhd ("the purchaser").
The sale and purchase agreement in respect of the said lands was executed by the defendants as vendors and MCB Eastern Land Sdn Bhd as purchaser on October 14, 1996. It was stamped on November 7, 1997. The purchase price of the said lands was RM47,511,222.
In paragraph 7 of the plaintiff's statement of claim, the plaintiff also avers that pursuant to the said letter of confirmation dated July 10, 1996, the plaintiff is entitled to be paid a sum of RM1,900,448.88 being 4% of the purchase price of RM47,511,222 being his service charges in respect of the sale of the said lands.
On January 26, 1998, the defendants issued to the plaintiff, two cheques for the total sum of RM100,000 and on April 8, 1998, another cheque for a sum of RM375,112.22 making it a total of RM475,112.22 which represents 1% of the purchase price of the said lands. This leaves a balance of RM1,425,336.66 or 3% of the purchase price being the balance of the service charges ("the said balance") still to be paid.
Despite several reminders, including a letter of demand dated November 11, 1998 which was sent to the defendants by the plaintiff's solicitors, the defendants have failed and neglected to pay the said balance to the plaintiff.
DEFENDANTS' STATEMENT OF DEFENCE
In the defendants' statement of defence the defendant contends that the plaintiff's claim should be struck out or dismissed with costs on the following grounds:
the plaintiff's claim is frivolous, vexatious and an abuse of the process of the court;
the plaintiff's claim is prohibited by the provisions of the Valuers, Appraisers and Estate Agents Act 1981 ("the said Act") as the plaintiff is not a registered estate agent;
the plaintiff's claim is invalid because:-
the service charges are actually brokerage commissions which are only payable by the defendants to the plaintiff and the said Ang Chin Huat if the plaintiff or his nominee had exercised the said option in accordance with the terms of the said option;
the plaintiff did not exercise the said option within the time frame provided for in clause 1 of the said option which expressly provides that the said option is only valid if it is exercised on or before July 16, 1996 after which, it is null and void;
the plaintiff or his nominee did not exercise the said option in writing and did not deliver the acceptance copy annexed to the said option to the defendants' named advocates and solicitors at their named address together with the sum of RM12,953,024 being the deposit and being 20% of the purchase price of RM64,765,120 pursuant to the express provisions of clause 2 of the said option;
contrary to clause 4 of the said option which expressly provides that the purchase price shall be calculated at RM70 per square foot without vacant possession which amounts to RM64,765,120 or RM80 per square foot with vacant possession which amounts to RM74,017,280.
The said lands were sold at a price of RM47,511,222 only;
contrary to clause 5 of the said option which expressly requires the purchaser to enter into a sale and purchase agreement with the defendants as vendor within 14 days from the exercise of the said option the sale and purchase agreement for the said lands was only executed on October 14, 1996 which date is outside the 14 day period allowed;
the deposit of RM12,953,024 as provided for in clause 2 of the said option was never paid to the defendants;
clause 9 of the said option expressly makes time the essence of the said option; and
at the time of the execution of the sale and purchase agreement on October 14, 1996 the said option and the said letter of confirmation relied upon by the plaintiff had long lapsed and were no longer valid.
alternatively, the plaintiff's claim is invalid because the said option and said letter of confirmation are in breach of the provisions of the said Act as the plaintiff was not a registered estate agent at the material time;
the plaintiff is well aware that the sum of RM475,112.22 comprised in 3 cheques which were issued by the defendants to the plaintiff being 1% of the purchase price is merely an ex-gratia payment of commission to the plaintiff as the plaintiff had introduced the said purchaser to the defendants on an oral undertaking by the plaintiff that he would not make any further claims in respect of service charges ("the said oral undertaking");
the third cheque being the "final portion of the [plaintiff's] commission" was issued in the name of one Ho Ewe Jit pursuant to the plaintiff's instructions as confirmed in writing by the plaintiff dated April 8, 1998 ("the said confirmation in writing") and the said oral undertaking;
by virtue of the said oral undertaking, the plaintiff is estopped from making any claim against the defendants for service charges; and
the defendants had conveyed to the plaintiff the defences as set out above in a letter dated December 15, 1998 by the defendants' solicitors;
DEFENDANTS' COUNTERCLAIM
In the defendants' counterclaim, the defendants are claiming for a refund of the sum of RM475,112.22 being ex-gratia commission together with interest thereon and costs. The defendants contend that the plaintiff is not legally entitled to keep the money. The defendants rely on the following grounds:
it was paid without consideration;
alternatively, the plaintiff has received the monies in breach of the provisions of the said Act.
PLAINTIFF'S REPLY TO DEFENDANTS' DEFENCE & COUNTERCLAIM
On April 25, 2000, the plaintiff filed his reply to the defendants' statement of defence and counterclaim (Encl.16).
The plaintiff denied all the defendants' contentions, in particular, the defendants' contentions that the sum of RM475,112.22 was an ex-gratia payment for commission and that he had given the said oral undertaking to the defendants. The plaintiff re-asserts that he is entitled to 4% of the purchase price being his service charges of which 1% has been paid and the balance of the 3% is still due and payable.
The plaintiff also asserts that the plaintiff has complied with all the terms of the said option and that the plaintiff had introduced the said purchaser to the defendants before the expiry of the date of the said option.
In conclusion, the plaintiff prayed that his claim be allowed with costs and the defendants' counterclaim be dismissed with costs.
DEFENDANTS' APPLICATION TO STRIKE OUT PLAINTIFF'S STATEMENT OF CLAIM
AND
REPLY TO THE DEFENDANTS' DEFENCE & COUNTERCLAIM
On May 30, 2000, the defendants applied vide summons in chambers
(Encl.28) to
strike out with costs the plaintiff's statement of claim and reply to the defendants'
statement of defence and counterclaim ("the said pleadings") and to
enter judgment in respect of the defendants' counterclaim pursuant to Order
18 r 19(1), (b) or (d) of the Rules of the High Court 1980 ("the RHC"). The defendants relied on the following grounds:
the plaintiff's
statement of claim being devoid of merits and prohibited
by the provisions of the said Act is frivolous, vexatious and an abuse of the
process or the court; and the plaintiff's
reply to the defendants' defence and counterclaim consisting
only of bare allegations and denials are devoid of merits and is frivolous,
vexatious and an abuse of the process of the court. In the defendants' supporting affidavit affirmed on May 24, 2000 by the first
defendant and filed on May 30, 2000 (Encl.29), the defendants have adopted the
contents of their statement of defence and counterclaim. The defendants have
also exhibited a copy of the said option (exh "A"), the said letter
of confirmation (exh "B"), the said confirmation in writing dated
April 8, 1998 (exh "C") and a letter dated December 15, 1998 from
the defendants' solicitors (exh "D") to support their contentions
in their statement of defence. In my judgment, exh "D" is clearly
inadmissible in these proceedings since it is a "without prejudice"
communication. The defendants have further reiterated that the
plaintiff's claim is expressly
prohibited by the said Act as he is not a registered estate agent and that the
plaintiff's reply to the defendants' defence and counterclaim contains bare allegations
and denials.
On January 31, 2001, upon obtaining prior leave of the court the plaintiff filed his affidavit in reply affirmed on January 13, 2001 (Encl.53).
According to the plaintiff, he has a good cause of action against the defendants. Although the plaintiff admits the said letter of confirmation (exh "B") and the said confirmation in writing (exh "C") he categorically denies the existence of the said option (exh "A") and requires the defendants to prove the existence of exh "A". The plaintiff also explains that the said confirmation in writing refers only to a part of the whole transaction between the plaintiff and defendants. The plaintiff seeks to explain that the contents of the said confirmation in writing actually referred to the payment of a portion of his 1% service charge to the said Ho Ewe Jit and that he did not understand the contents of the said confirmation in writing which was prepared by the first defendant upon the plaintiff's instructions when the plaintiff signed it.
According to the plaintiff he only discovered this when he went home and his son, Lim Siew Kee, read exh "C" and told the plaintiff that exh "C" is confusing and could mean something else. The plaintiff immediately telephoned the first defendant that the latter had distorted the actual position. The first defendant told the plaintiff that if the plaintiff was dissatisfied with exh "C" the first plaintiff can exchange it for a fresh one which will be prepared by the first defendant. The plaintiff returned exh "C" and the first defendants' wife prepared a fresh confirmation in writing (exh "LEH-4") but the plaintiff did not agree to it and the plaintiff refused to sign exh "LEH-4" or take back exh "C".
The plaintiff insists that the "final portion" referred to in exh "C" refers to a sum of RM375,112.22 being the final portion of his 1% service charge amounting to RM475,112.22 which is calculated as follows:
RM475,112.22 - RM100,000.00 = RM373,112.22
In paragraph 12(a), the plaintiff states that although he is not a registered estate agent he is, nevertheless, entitled to be paid the service charges of 4% of the purchase price being his remuneration because he had performed his obligations, the defendants were aware at all material times that he was not a registered estate agent, that in August 1996 he had introduced the said purchaser to the first defendant and the said lands were subsequently sold to the said purchaser.
On April 20, 2001, the defendants filed their affidavit in reply affirmed by the first defendant on April 19, 2001 (Encl.62). The first defendant disagreed with the plaintiff's version of the events surrounding exh "A", exh "C" and exh "LEH-4" as given by the plaintiff in his affidavit in reply. The defendants, nevertheless, admitted that they agreed to pay the plaintiff the 1% commission for the plaintiff's services as an estate agent on an ex-gratia basis as the said purchaser was introduced by the plaintiff and the plaintiff had agreed with the amount of 1% and had signed exh "C".
On May 10, 2001, the plaintiff filed his affidavit in reply affirmed by himself on May 3, 2001 (Encl.64).
The plaintiff disagreed with the defendants' version of events surrounding exhs "A", "C" and "LEH-C" and reasserts that his version is correct. The plaintiff further states that he has instructed his solicitors to apply to the court to amend his statement of claim to reflect the true position.
DECISION OF THE DEPUTY REGISTRAR
On October 11, 2001, the learned deputy registrar dismissed the defendants application with costs on the ground that the plaintiff's claim is not one which is "obviously unsustainable" and that there are factual issues which necessitated the evidence of witnesses in a full trial. The learned deputy registrar did not identity the factual issues.
On October 18, 2001 the defendants filed their notice of appeal to the judge in chambers (Encl.71) against the decision of the learned deputy registrar.
DECISION OF THE COURT
The court heard lengthy submissions on August 5, 2002 and October 8, 2002. On October 8, 2002, after considering the contents of the affidavits filed by both the parties, the pleadings, the lengthy oral submissions, the written submissions and the authorities cited by both the learned counsels, the court allowed the defendants' appeal (Encl.71) with costs and ordered that the said pleadings be struck out.
However, the court did not give judgment to the defendants on the defendants' counterclaim. The reasons are first, the defendants have in their statement of defence admitted that the sum of RM475,112.22 claimed is an ex-gratia payment to the plaintiff by the defendants. Secondly, the defendants have also admitted in paragraph 11 of their statement of defence and also in their affidavit in reply (Encl.62) that it was the plaintiff's efforts in introducing the said purchaser to the defendants which have enabled the defendants to sell the said lands to the said purchaser, albeit, after the said option has expired and at a price much lower than the two prices stated in the said option. Therefore, the defendants' counterclaim that the monies were paid to the plaintiff without consideration or alternatively, that the plaintiff has received the monies in breach of the provisions of the said Act is dearly devoid of any merits and should be dismissed on the ground that it is an abuse of the process of the court.
ISSUES FOR THE COURT'S DETERMINATION
Before arriving at its decision to strike out the said pleadings, the court
considered the following two issues:
whether the plaintiff's
statement of claim and reply to the defendants'
defence and counter claim is frivolous or vexatious; and whether the plaintiff's
statement of claim and reply to the defendants'
defence and counterclaim is an abuse of the process of the court. THE
SUBMISSIONS OF THE DEFENDANTS' COUNSEL
Mr. YC Wong, learned counsel for the defendants, submitted that if the court is satisfied with any of the three grounds relied upon by the defendants, to wit, illegality, total failure on the plaintiff's part to comply with the terms of the said option and letter of confirmation and waiver/estoppel, accord and satisfaction, then the court should strike out the said pleadings. The reason is because any one of the three grounds standing by itself is sufficient to achieve the purpose of the defendants' application in Encl.(28).
He also submitted that by virtue of the plaintiff's own admission in his statement of claim that he is not a registered estate agent, the plaintiff's claim being a claim for fees for services rendered as an estate agent is obviously unsustainable and is also an abuse of the process of the court because of the prohibition contained in the clear provisions of s 22C(1) of the said Act, in particular, paragraphs (a), (aa), (ba), (c) and (d).
He cited the case of Appadurai Ponnwamy v Pentadbir Harta Pesaka Appalasamy Nookiah, deceased [1998] MLJU 538 in support of his submissions. He also submitted that the plaintiff's claim is doomed to failure because he has not complied with the terms of the said option. He relied on the case of Holwell Securities Ltd v Hughes [1973] 2 All ER 476 and Howard Houlder & Partners Ltd v Manx Islec Steamship Co Ltd [1923] 1 KB 110. He further submitted that the plaintiff's acceptance of the three cheques for a total sum of RM475,112.22 and the signing by the plaintiff of the said confirmation in writing amounts to a waiver of the plaintiff's remaining claim, if any, the plaintiff is estopped from filing the writ of summons and statement of claim and the plaintiff's claim has been extinguished by accord and satisfaction.
THE SUBMISSIONS OF THE PLAINTIFF'S COUNSEL
Mr. Saranjit Singh, the learned counsel for the plaintiff, has submitted, inter alia, that the said Act is inapplicable to the plain tiff because he is not a registered estate agent under the Act.
He also submitted that since the transaction is a one-off transaction and the plaintiff has not held himself out to the public or advertised his services or issued name cards proclaiming himself an estate agent, the plaintiff cannot be said to be undertaking the business of an estate agent as defined in the said Act and the plaintiff is, therefore, entitled to the sum claimed as an allowance or payment for services rendered.
He further submitted that since the defendants have already paid the 1% commission to the plaintiff, they are estopped from relying on this defence. He cites the case of Ong Kee Ming v Quek Yong Kang [1991] 3 MLJ 294 in support of his submissions.
THE LAW APPLICABLE
Order 18 r 19 of the RHC provides as follows:
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(1) |
The court may at any stage of the proceedings order to be struck out or amended any pleading of the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that:
and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be. |
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.... (3) |
No evidence shall be admissible on an application under paragraph (1)(a). |
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(4) |
This rule shall, so far as applicable, apply to an originating summons and a petition as if the summons or petition, as the case may be, were a pleading. [emphasis added] |
In these proceedings the defendants have invoked only r19(1)(b) and (d) of Order 18.
Lindley LJ in an old English case, Att-Gen of Duchy of Lancaster v L&NW Ry [1892] 3 Ch 274 at 277 held that by these words "frivolous and vexatious" are meant cases which are obviously frivolous or vexatious or obviously unsustainable.
The expression "frivolous or vexatious" also includes proceedings which are an abuse of the process (see ET, Mailers Ltd v Robertson [1974] 1 CR72, cited with approval in Ashmore v British Coal Corp [1990] 2 QB 338; [1990] 2 All ER 981, CA).
"The term an abuse of the process of the court" connotes the process of the court must be used bona fide and properly and must not be abused. The court will prevent the improper use of its machinery, and will in a proper case summarily prevent its machinery from being used as a means of vexation and oppression in the process of litigation (see Castro v Murray (1873) 10 Ex 213; Dawkins v Prince Edward of Saxe Weimar, Willis v Earl Beauchamp (1886) 11 P59, per Bowen LJ at 63).
Order 18 r 19(1) (d) confers on the court in express terms powers which the court has previously been exercising under its inherent jurisdiction where there appeared to be "an abuse of the process of the court." In an application under Order 18 r 19(1)(d) the applicant can go into all the facts and affidavits as to those facts are admissible (see Willis v Earl Howe [1893] 2 Ch 545 at 551 and 554; Vinson v Prior Fibres Consolidated Ltd [1906] WN 209; Norman v Matthews (1916) 85 LJKB 857).
The categories of conduct rendering a claim frivolous, vexatious or an abuse of process are not closed but depend on all the relevant circumstances and for this purpose considerations of public policy and the interest of justice may be very material (see The Supreme Court Practice, 1999, vol 1, paragraphs 18/19/18, p 352).
FINDINGS OF THE COURT
In my judgment, even if the plaintiff succeeds in proving that there exists an agreement between the plaintiff and the defendants as averred by the plaintiff in the said pleadings and the plaintiff's affidavits filed in these proceedings, the agreement is void and unenforceable under s 24 of the Contracts Act 1950 as it clearly contravenes s 22C of the said Act. The reason is because such an agreement is actually a contract between the plaintiff and defendants whereby the defendants would pay the plaintiff 4% of the purchase price as commission in consideration of the plaintiff undertaking estate agency practice in inviting offers from the said companies to purchase the said lands. On this ground alone, the court is justified in striking out the said pleadings.
Section 24 of the Contracts Act 1950 provides as follows:
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24. |
What considerations and objects are lawful, and what not The consideration and object of an agreement is lawful, unless-
In each of the above cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. ILLUSTRATIONS ....
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Section 22C(1) of the said Act provides as follows:
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22C |
Restrictions on estate agency practice
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Section 22B of the said Act provides as follows:
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22B. |
Estate agency practice
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The term "estate agency practice" used in s 22B(1) is defined as follows in s 2 of the said Act:
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"estate agency practice" means acting or holding oneself out to the public as ready to act, for a commission, fee, reward or other consideration, as an agent in respect of the sale or other disposal of land and buildings and of any interest therein or the purchase or other acquisition of land and buildings and of any interest or in respect of the leasing or letting of land and buildings and of any interest therein; |
In my judgment, the consideration which the plaintiff has agreed to give to the defendants which he has in fact given by virtue of the defendants' own admission, to wit, the procuring of a purchaser from the said group of companies to purchase the said lands belonging to the defendants is an unlawful consideration pursuant to s 24(a) and (b) of the Contracts Act 1950 as it is forbidden by the said Act and it is also of such a nature that, if permitted, it would defeat the said Act.
The reason is because s 22C(1)(ba) of the said Act prohibits in very clear terms any person from offering for sale or inviting offers to purchase any land, building, etc., irrespective of whether such land, building, etc., is located within Malaysia or outside Malaysia unless he is a registered estate agent.
It is an undisputed fact in the present case that the plaintiff is not a registered estate agent.
The undertaking of any estate agency practice by a person who is not a registered estate agent such as the plaintiff in the present case is also prohibited by s 22C(1)(c) of the said Act read together with s22B(1) and s 2 of the said Act. This is because the plaintiff by acting as agent for what he calls a "fee" and what his learned counsel calls a "remuneration" but which the defendants and their learned counsel call a "commission" in respect of the sale of the said lands to a company from the said group of companies has undertaken "work specified in s 22B" within the prohibition of s 22C(1)(c) of the said Act, namely, "estate agency practice" mentioned in s 22(B)(1) of the said Act which expression is defined in s 2 of the said Act and reproduced above.
Section 22B(1) makes it clear that only a registered estate agent is authorised to undertake "estate agency practice".
However, the plaintiff seeks to argue that these prohibitions do not apply to him because he is not even an estate agent but merely an agent to the defendants and, therefore, he is not caught by the prohibitions contained in s 22C and 22B of the said Act. Further, he argues that the transaction is only a "one-off' transaction and that he is in fact gainfully employed as a director of various companies.
In my judgment his arguments do not hold water and are devoid of any merits because even a single acting for a "commission fee, reward or other consideration" as an agent in respect of the sale or other disposal of land and/or buildings is caught by the prohibition in the said Act. Such a single acting is also an offence under s 30 of the said Act.
Section 30 of the said Act provides as follows:
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30. |
Offences Any person who-
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commits an offence and is liable on conviction to a fine not exceeding twenty-five thousand ringgit or to imprisonment for a term not exceeding three years or to both and he shall be liable to a further penalty of five hundred ringgit for each day during the continuance of such offence. |
In my judgment, the plaintiff's claim is frivolous and vexatious because it is obviously unsustainable by reason of illegality. It is also an abuse of the process of the court because the plaintiff is seeking recourse to the courts in order to enforce a void agreement in which his consideration is unlawful for which he can be prosecuted for an offence under s 30 of the said Act. Surely the court cannot lend its hand to help the plaintiff to recover the said balance from the defendants. The court should instead strike out the said pleadings.
In my judgment, Ong Kee Ming is distinguishable because the defence of illegality was never raised; and the decision of Mohd Hishamudin Mohd Yunus J in Appadurai is applicable to the facts of this case.
In the premises, as the court is satisfied that the said pleadings disclose manifest illegality which renders the said pleadings frivolous and vexatious and also an abuse of the process of the court, the court allowed the defendants appeal to strike out the plaintiff's statement of claim and reply to the defendants' defence and counterclaim with costs.
Cases
Appadurai Ponnusamy v Pentadbir Harta Pesaka Appalasamy Nookiah, deceased [1998] MLJU 538; Ashmore v British Coal Corp [1990] 2 QB 338; [1990] 2 All ER 981, CA; Att-Gen of Duchy of Lancaster v L&NW Ry [1892] 3 Ch 274; Castro v Murray (1875) 10 Ex 213; Dawkins v Prince Edward of Saxe Weimar, Willis v Earl Beauchamp (1886) 11 P 59; ET, Mailers Ltd v Robertson [1974] 1 CR 72; Holwell Securities Ltd v Hughes [1973] 2 All ER 476; Howard Houlder & Partners Ltd v Manx Islec Steamship Co Ltd [1923] 1 KB 110; Norman v Matthews (1916) 85 LJKB 857; Ong Kee Ming v Quek Yong Kang [1991] 3 MLJ 294; Vinson v Prior Fibres Consolidated Ltd [1906] WN 209; Willis v Earl Howe [1893] 2 Ch 545
Legislations
Contracts Act 1950: s.24
Rules of the High Court 1980: Ord.18 r 19
Valuers, Appraisers and Estate Agents Act 1981: s.2, s.22B, s.22C, s.30
Authors and other references
The Supreme Court Practice, 1999, vol 1
Representation
Saranjit Singh (Adliza Subra & Partners) for plaintiff
YC Wong (Lim Kean Siew &c Co) for defendants
Notes:-
This decision is also reported at [2003] 2 AMR 520
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