by MH Law | June 25, 2024 | Case Spotlight
Overview
A dispute arose in Teckland Motors Sdn Bhd vs. Pang Guan Hong & Ors, where two parties claimed the right to buy the same property under different agreements. The case examines which sale agreement takes priority and how rightful ownership is determined, with the High Court’s ruling offering guidance on resolving such disputes.
Brief Facts
Both the plaintiff (P) and the Interveners (I) were competing to purchase a shop in Bandar Nobong Tebal that was owned by the 3 defendants (D)
(D) agreed to sell the shoplot to (I) for RM250k, contingent on them securing a bank loan first. (I) had provided a deposit of RM3k to (D) at the time.
Soon after, (P) offered (D) RM240k in cash for the property. One of the defendants had accepted the offer and received a deposit of RM20k on the condition that the deal with (I) does not go through, (I) doesnt receives the bank loan and that he receives agreement from the other 2 defendants.
The other 2 defendants had rejected the second offer, wanting to sell the property to (I).
(I) confirmed their intention to proceed with the deal without financing from the bank. The defendant had attempted to return the RM20k deposit to (P), but was rejected.
Both prospective buyers of the property had logdged private caveats on the property and stalled the sale to any party. The court had to decide which claim to the property was valid.
Issues on Appeal
Issue No 1: Whether there is a binding sale and purchase agreement between the defendants and the Interveners prior to any concluded agreement with the plaintiff and/or whether there is a binding sale and purchase agreement between the defendants and the plaintiff?
The courts had used the general principles of contract law to determine which of the two was a binding sale and purchase agreement.
Court's Findings on Issue 1:
Formation of a Contract:
It was emphasized that for a contract to exist, there must be a clear offer and acceptance, along with the certainty of parties, price, property, and terms. A conditional offer or acceptance may not result in a binding contract unless the conditions are fulfilled.
Plaintiff's Claim
The plaintiff argued that they had a concluded contract with the defendants, based on an offer made and accepted, with part performance shown by the deposit payment. However, the court considered the defendant's version of events, where the offer from the plaintiff was conditional upon the interveners aborting their agreement.
Defendants’ Version
The first defendant testified that the offer from the plaintiff was conditional on the interveners withdrawing their agreement to purchase the property, which was not fulfilled. The defendants took steps to return the deposit to the plaintiff when they found that the conditions could not be met. The court found the first defendant's version more credible, supported by contemporaneous evidence.
Conditions Precedent
The court concluded that there were conditions precedent to the contract between the defendants and the plaintiff, which were not fulfilled. Specifically, the interveners’ agreement had to be canceled before the sale to the plaintiff could proceed. As such, no legally binding contract existed between the defendants and the plaintiff.
Binding Agreement with the Interveners
In contrast, the court found that there was a binding contract between the defendants and the interveners. This was based on the unqualified offer from the interveners, their deposit payment, and their intention to proceed with the sale. Despite the lack of a formally executed agreement, the court found that part performance and the preparation of a draft agreement constituted a concluded contract.
Conclusion
The court ruled that the sale and purchase agreement between the defendants and the interveners was binding, and there was no such agreement between the defendants and the plaintiff. The plaintiff’s claim was dismissed, and the interveners’ position was affirmed.
Issue No 2: Whether the interveners’ rights prevail over the plaintiff’s purported purchase of the said property?
In this issue, the court was tasked with determining whether the interveners' rights to the property take precedence over the plaintiff's purported purchase.
Court's Findings on Issue 2:
Sequence of Events
The court considered the timeline of events, particularly focusing on the fact that the interveners had first agreed to purchase the property and made a deposit of RM3,000 on 13 December 2021. In contrast, the plaintiff paid a deposit of RM20,000 only on 21 December 2021, after the defendants had already agreed to sell to the interveners.
Plaintiff’s Knowledge of Interveners' Rights
The plaintiff’s offer was made with full knowledge that the defendants had already agreed to sell the property to the interveners. By proceeding with the offer, the plaintiff did so at their own risk, knowing that the interveners’ rights to the property were already established.
Private Caveat
The interveners lodged a private caveat on the property on 24 December 2021, prior to the plaintiff lodging their caveat on 27 December 2021. The court referenced the Federal Court case Syed Ibrahim bin Syed Abdul Rahman v Liew Su Chin (F) [1984] 1 MLJ 160, which established that when two parties hold competing equitable interests, the general rule of equity gives priority to the person whose equity is first in time.
Conclusion
Given that the interveners’ rights were established first, including the payment of the deposit and the lodging of the caveat, the court concluded that their rights to the property take precedence over the plaintiff’s purported purchase. The interveners, being first in time, prevailed in terms of priority.
Issue No 3: Whether the plaintiff had a caveatable interest to lodge a private caveat on the title of the said property?
In this issue, the court examined whether the plaintiff had a caveatable interest to justify the lodging of a private caveat on the title of the property.
Court's Findings on Issue 3
Plaintiff's Claim
The plaintiff lodged a private caveat based on the premise that they had entered into a sale and purchase agreement with the defendants and had paid a deposit of RM20,000. However, in the caveat form, the plaintiff acknowledged that the defendants had expressed their intention not to proceed with the sale, stating that "wakil penjual tiba-tiba memaklumkan kepada kami bahawa beliau tidak ingin meneruskan penjualan hartanah tersebut kepada Teckland" (the seller's representative suddenly informed them that they did not wish to proceed with the sale to Teckland).
Conditions Precedent
The court noted that the sale and purchase agreement between the plaintiff and the defendants was subject to conditions precedent, meaning that the agreement would only become binding if certain conditions were met. The court referenced the case of Sinku Akramuz Zaman & Ors v Sri Vijaya Estates Sdn Bhd [2022] MLJU 741 to explain the effect of conditions precedent. Until these conditions were fulfilled, there was no valid and binding contract.
No Concluded Contract
The court emphasized that, due to the existence of conditions precedent, there was no enforceable agreement between the plaintiff and the defendants. This was consistent with the Federal Court's decision in Shell Malaysia Trading Sdn Bhd v Lim Yee Teck & Ors [1982] 2 MLJ 181 and the Court of Appeal's judgment in GPQ Sdn Bhd v Constant View Sdn Bhd [2017] 6 MLJ 728, which established that an agreement with conditions precedent is not enforceable until those conditions are met.
Caveatable Interest
Based on the lack of a concluded contract, the court held that the plaintiff did not have a caveatable interest. The court referred to the case of Mahabuilders Sdn Bhd v Pentadbir Tanah Johor Bahru & Anor [2013] 10 MLJ 625, which established that negotiations alone, without a concluded contract, do not create an interest in the property that can be protected by a caveat.
Testimony of First Defendant
Although the first defendant testified that the plaintiff had a right to lodge the caveat, the court determined that the legal issue of whether the plaintiff had a caveatable interest was not dependent on this testimony. The court ruled that even if there was a caveatable interest at the time of the deposit payment, it had lapsed due to the failure to meet the conditions precedent.
Conclusion
The court ruled that the plaintiff did not have a caveatable interest because the sale and purchase agreement was subject to conditions precedent, which had not been fulfilled. Therefore, the plaintiff's private caveat was ordered to be removed. However, the court refrained from declaring that the caveat was wrongfully entered and did not award damages, as there was no evidence of any loss suffered due to the entry of the caveat.
Judgement Summary
No Binding Contract
The court found that the plaintiff failed to prove their claim on a balance of probabilities. It was concluded that there was no binding contract between the defendants and the plaintiff, primarily due to the conditions precedent that were not fulfilled.
No Declarations or Specific Performance:
As there was no valid and binding contract, the court denied the plaintiff's requests for declarations or an order for specific performance against the defendants.
Removal of Private Caveat
The court determined that the plaintiff did not have a caveatable interest and ordered the immediate removal of the private caveat lodged on the property.
Refund of Deposit
The defendants were ordered to refund the deposit of RM20,000 paid by the plaintiff within 14 days from the date of the judgment.
No Order as to Costs
Due to the peculiar circumstances of the case, there was no order as to costs. This applied to both the defendants and the interveners, despite the latter having made a similar counterclaim to the defendants.
The plaintiff's claim was dismissed, and the defendants were required to refund the deposit. The court emphasized the lack of a binding contract and ruled that the plaintiff's private caveat was unjustified. No costs were awarded to any party.
Key Takeaways
Section 33 of the Contracts Act 1950 plays a crucial role in maintaining the integrity of agreements that depend on uncertain future events. By stipulating that such contracts are not enforceable until the event in question actually occurs, the law ensures that the rights and obligations of the parties involved are only triggered when all stipulated conditions are satisfied. This approach not only prevents premature enforcement but also upholds the principle of equitable fairness.
A key tenet of equity emphasized in this context is that, in cases of competing equitable interests, the interest established earlier takes precedence. This principle fosters a sense of order and predictability, ensuring that parties who act first in good faith are given priority. Beyond its immediate legal implications, this provision serves to reduce the likelihood of disputes arising from unclear or contingent agreements.
Moreover, by requiring all conditions to be fulfilled before enforcement, Section 33 enhances transparency in contractual dealings and protects parties from the risk of speculative or unjust claims. This safeguards the intentions of contracting parties and promotes trust in the legal system as a fair and reliable mechanism for resolving disputes. Ultimately, the provision supports a balanced and equitable approach to contract law, which is essential for fostering confidence in both personal and commercial transactions.
****
Have a question? Please contact us at info@munhoelaw.com
