1. Case Information
- Court: Court of Appeal, Putrajaya.
- Coram: Ramly Ali, Mohtarudin Baki, David Wong Dak Wah JJCA.
- Decision Date: 16 May 2013.
- Parties: Nippon Express (M) Sdn Bhd and Nittsu Transport Service (M) Sdn Bhd (Appellants) vs. Che Kiang Realty Sdn Bhd (Respondent).
2. Background and Facts On 5 June 1997, the appellants signed Purchase Forms and Offers to Purchase for two pieces of industrial land and paid an initial 5% of the purchase price. They later paid the balance 5% (completing the 10% down payment) on the condition that certain amendments to the Sale and Purchase Agreement (SPA) were agreed upon. Although the amendments were largely settled, the SPA remained unsigned by the appellants. On 31 January 2000, the appellants sought to terminate the agreements and recover their 10% payment because the respondent failed to deliver vacant possession within 30 months of the initial payment. The respondent contended no contract existed due to the unsigned SPA and forfeited the 10%.
3. Issue 1: Existence of a Binding Contract The Court of Appeal examined the “Status of Purchase” section in the Purchase Forms, which stated “sale is confirmed upon compliance with Item 16 and/or 17”. The Court held:
“The operative phrase is ‘and/or’ and in simple and plain English they mean ‘one or the other or both’. In this case, there is a binding contract once the appellants had complied with Item 16 (payment of the 10% of the purchase price) or Item 17 (signing of the sale and purchase agreement) or Item 16 and Item 17″.
Because the respondent drafted both documents and the terms were inconsistent, the Court applied the contra proferentem rule:
“The most favourable construction to be given in the context of this case is that there is in existence of a binding contract once Item 16 is complied with“.
4. Issue 2: Waiver of the Requirement to Sign the SPA The Court further determined that even if signing the SPA was a requirement, the respondent’s conduct altered the situation:
“…the respondent had waived the compliance of Item 17 (signing of the sale and purchase agreement) by accepting the second 5% of the purchase price“.
5. Issue 3: Commencement of the 30-Month Period The respondent argued that the 30-month period for delivering vacant possession had not triggered because the SPA was never signed. The Court rejected this, citing established precedent (Faber Union Sdn Bhd v. Chew Nyat Shong & Anor):
“…for the purpose of ascertaining the date of delivery of vacant possession, the relevant date when time starts to run is the date on which the purchaser paid the booking fee and not the date of the sale and purchase agreement”.
Consequently, the period commenced on 5 June 1997 and expired on 4 December 1999.
6. Issue 4: Right to Terminate for Fundamental Breach The Court found the respondent had failed to carry out basic infrastructure works beyond initial site clearing. Regarding the nature of this failure, the Court stated:
“Clause 26 … specifically provides that ‘time is the essence of the agreement’. This clause reflects the parties’ intention to treat the obligation to deliver vacant possession of the properties within 30 months as a fundamental term of the contract“.
The Court concluded that:
“Fairness demands that such reciprocal right be given to the appellants when there is a fundamental breach of the agreement by the defendant”.
7. Outcome The Court of Appeal allowed the appeal and set aside the High Court’s decision. It ordered the respondent to refund the deposits (RM393,786.30 and RM389,121.00) with 8% interest per annum from the date of payment and costs of RM40,000.00.
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.
