The case involved an appeal by the plaintiffs (Balakrishnan A/L Devaraj and his wife, Girija Devy A/P Gopinath Nair) against the dismissal of their claim by the High Court. The Court of Appeal unanimously allowed the appeal in favor of the plaintiffs.
Legal Principle
The central legal issue was misrepresentation and the right of the innocent party to rescind the sale and purchase agreement under the Contracts Act 1950.
- Misrepresentation: A false statement of existing fact, made prior to or during the preliminary stages of a contract, with the intention and effect of inducing the other party to enter into the contract, is a misrepresentation.
- Voidable Contract: By virtue of Section 19(1) of the Contracts Act 1950, a contract entered into by misrepresentation (whether innocent or fraudulent) is voidable at the option of the innocent party.
- Rescission and Restitution: Rescission is the remedy sought, which terminates the contract ab initio (from the beginning) and aims to restore the parties to the status quo that existed before the contract was concluded (restitutio in integrum). The court noted that restitutio in integrum was still possible in this case.
Court’s Reasoning
The Court of Appeal found that the defendant (Admiral Cove Development Sdn Bhd), the developer of the Marina Bay Condominium, had made a false and material representation that induced the plaintiffs to purchase a unit.
- False Representation: The defendant’s miniature model, brochure, and agents represented the condominium as having a sandy beach front and direct access to the sandy beach. However, upon receiving vacant possession, the plaintiffs discovered the area had a long concrete wall, rocks, stones, and boulders, with no sandy beach or direct access to one, as shown in the model.
- Inducement: The Court held that the plaintiffs were induced by the misrepresentation. The first plaintiff had a preference for sandy beaches and specifically changed his chosen unit from the 8th floor to a ground floor unit for easier access to the sandy beach. He testified that he would not have purchased the unit if the sandy beach and direct access were not represented.
- Delay Not Fatal: The Court addressed the delay in rescinding the contract (rescission notice was issued in October 2002, while vacant possession was in 1999) and held that it was not fatal because the first plaintiff was suffering from colon cancer and other illnesses, which restricted his mobility and prevented him from viewing the completed unit sooner.
Excerpts from the Court
The Court of Appeal’s judgment included the following notable statements:
- On the Miniature Model as Representation: “But the photographs of the miniature models, at pp 235 and 236 of the appeal record, speak a thousand words. They say that seeing is believing. The photographs of the miniature models show the whole project of the defendant having direct access to the beach and then to the sea… It is also our judgment, that the miniature model speaks, represents and asserts the presence of the sandy beach and the sea and access to them bearing in mind that, ‘Everything in the miniature model is true’.“
- On the Finding of Misrepresentation and Inducement: “It is our judgment that there was misrepresentation on the part of the defendant when the condominium unit was sold to the plaintiffs. It is also our judgment that the plaintiffs were induced to purchase the condominium unit by the defendant’s misrepresentation. It was a false statement of fact that induced the plaintiffs to enter into the sale and purchase agreement.“
- On the Remedy of Rescission: “Rescission of the sale and purchase agreement is the best remedy if there has been a misstatement or misrepresentation of material facts, by the representor to the representee, with the intention and effect of inducing the representee to enter into the sale and purchase agreement…“
- On the Outcome: The appeal was allowed, and the Court granted the following:
- A declaration that the plaintiffs had validly rescinded the sale and purchase agreement.
- The return of the sum of RM505,313.27.
- Damages for misrepresentation to be assessed by the trial court.
- Interest on the sum of RM505,313.27 at 8% per annum from the date of judgment to the date of realization.
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.
