Case Analysis: Hiap Soon Hong Sdn Bhd v. Leopad Assets Sdn Bhd [2021] 7 MLJ 797 HC
Court: High Court, Ipoh Judge: Hashim Hamzah J Date of Judgment: 13 September 2020
1. Background and Facts
The plaintiff (vendor) agreed to sell a piece of land in Perak to the defendant (purchaser) for RM17 million pursuant to a Sale and Purchase Agreement (SPA) dated 16 June 2014. Upon execution, the defendant paid a deposit of RM1.7 million(10% of the price) and was granted vacant possession of the land.
The SPA was a conditional contract subject to several conditions precedent (CPs) listed in Clause 2.1, which the plaintiff was required to fulfill within six months (the “Approval Period”). These CPs included:
- Obtaining the original Consent to Transfer from the State Authority.
- Furnishing the original Certificate of Fitness (CF) or Certificate of Completion and Compliance (CCC), approved building plans, and “as-built” plans.
- Providing manuals, handbooks, and maintenance records for machinery and equipment on the land.
The balance of the purchase price was only due six months after the “Fulfillment Date”, which was defined as the date the defendant’s solicitors received all required CP documents.
The six-month Approval Period expired on 16 December 2014 with the CPs unfulfilled. However, the defendant did not rescind the contract immediately. Instead, it continued to negotiate and request compliance for over a year. On 6 April 2016, the defendant issued a notice of termination, alleging the plaintiff failed to fulfill the CPs, and demanded a refund of the deposit. The plaintiff sued, claiming the termination was unlawful and seeking to forfeit the deposit.
2. Key Legal Issues
The court’s determination focused on:
- Whether the plaintiff failed to comply with its obligations under Clause 2.1.
- Whether the defendant’s termination of the SPA was lawful.
- Whether the plaintiff was entitled to forfeit the RM1.7 million deposit.
3. Judicial Findings and Analysis
- Time Rendered “At Large”: The original deadline for the CPs was 16 December 2014. The court found that because the defendant did not exercise its right to rescind immediately and continued to negotiate/request documents without fixing a new, reasonable deadline, time ceased to be of the essence and was rendered “at large”. In this state, the plaintiff was only required to perform its obligations within a reasonable time, which the court found it had done.
- Fulfillment of Conditions Precedent: The court determined that the plaintiff had successfully fulfilled all CPs on a balance of probabilities:
- The CF/Building Plan Issue: The defendant argued the CF was invalid because it did not explicitly mention a “workshop”. The court accepted evidence from a local authority witness (SP2) that the term “building” in the CF encompassed the workshop as per the approved plans.
- Consent to Transfer: While the original consent had lapsed, the court found this was due to the defendant’s own “misconceived insistence” on a fresh CF despite the local authority’s clarification. A party cannot capitalize on a situation caused by its own breach.
- Manuals and Records: The court dismissed the defendant’s complaints regarding these documents as a “purely an afterthought” because they were never raised as issues prior to the litigation.
- Unlawful Termination: Once the CPs were fulfilled, the SPA was no longer a conditional contract and had come into full force. Since the plaintiff was not in breach, there was no valid reason for the defendant to terminate. The court ruled the termination was “bad in law”.
- Forfeiture of Deposit: Because the defendant unlawfully terminated the contract, the plaintiff was entitled to forfeit the RM1.7 million deposit. The court noted that a 10% deposit is conventionally accepted as reasonable compensation for a breach in land transactions.
4. Conclusion
The High Court allowed the plaintiff’s claim and dismissed the defendant’s counterclaim. The court granted declarations that the plaintiff had fulfilled all terms of the SPA, the defendant’s termination was unlawful, and the plaintiff was entitled to forfeit the deposit.
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
