CASES OF THE WEEK

The appellants and the respondents entered into three agreements (`the agreements') for the appellants to buy the entire paid-up capital of the second respondent and, in the process, acquire ownership over certain plantation lands, mill and machinery (`the assets') which were due to be transferred to the second respondent. The assets were initially offered by Special Administrators (`SAs') under the Pengurusan Danaharta Nasional Berhad Act 1998, to the first respondent in part settlement of monies owed to it by the chargor of the assets. The first respondent, however, requested the SAs to transfer the assets to its nominee, the second respondent. Under the agreements, which involved a total consideration of RM53 million, the appellants paid the respondents RM4.1 million as deposits. The agreements were subject to the fulfillment of various conditions precedent by the respondents, ie, getting the SAs, to transfer the assets to the second respondent free of encumbrances and getting approvals from the State Government and the Foreign Investment Committee to the transfer of the assets. Following the execution of the agreements, the first respondent delegated management of the assets to the appellants and their nominees under a profit-sharing arrangement under which the respondents were guaranteed RM500,000 per month (RM6 million per year) and another RM25,000 for rental of the mill. Seven months after the agreements were signed, the respondents issued a letter to the appellants (`the letter') confirming their mutual agreement "... that for the moment each of us shall be entitled, but reserved our respective rights, to terminate the overall arrangement and understanding (including the Shares Agreement of 5 April 2002 which lapsed on 5 October 2002 since all relevant approvals have not been obtained) to enable each of us to consider our respective positions". Considering the letter as intending to put time for completion at large to enable the first respondent to satisfy the conditions precedent, the appellants sought to complete the agreements by paying the respondents the balance purchase price due thereunder. The respondents rejected the move. They regarded the agreements as having lapsed due to their failure to satisfy the conditions precedent on time. They also regarded the letter as a `suspension agreement' to enable the parties to re-negotiate a fresh agreement for the sale of the assets. The appellants sued for specific performance of the agreements. The respondents counterclaimed that the agreements were void and of no legal effect. The High Court granted judgment to the appellants. On appeal, the Court of Appeal (`COA') set aside the decree of specific performance and ordered the High Court to hear the counterclaim. The counterclaim was dismissed by the High Court. In its decision, the COA held that the High Court was wrong to have ordered specific performance when the agreements continued to remain suspended and when the conditions precedent had not been fulfilled. The COA noted that the respondents still retained part of the deposits that had been paid by the appellants and that the latter continued to jointly manage and operate the assets "by virtue of the 15 November 2002 letter which governed the further relationship between the parties after the suspension of the agreements". The appellants obtained leave to appeal to the Federal Court. On the question, inter alia, whether ss. 32 to 34 of the Contracts Act 1950 (`CA') applied to suspended contracts containing conditions precedent to be fulfilled.

Held (allowing appeal with costs)

Per Suriyadi FCJ delivering the judgment of the court:

(1) Sections 32, 33 and 34 of the CA fell under Part IV falling under `of contingent contract' and therefore the question was answered in the affirmative. (paras 35 & 36)

(2) The COA had misdirected itself when it stated that the conditions precedent remained unfulfilled. The statement of agreed facts showed that the major conditions precedent had been satisfied way before 15 November 2002 letter was issued. (para 28)

(3) The notice of termination was only served on the appellants on 28 November 2007, by which time the conditions precedent had already been satisfied. With the conditions precedent satisfied what remained thereafter was performance. There was no reason for the respondents to validly resist the decree of specific performance after the impediments had been cleared in the circumstances of the case. The raison d'etre for the 15 November 2002 letter vanished with the fulfillment of the conditions precedent. (para 29)

(4) Appreciating the conduct of the respondents and deciphering the letter, not for a moment did the respondents assert that the composite agreements were void on account of the failure to fulfill the conditions precedent. Instead, as the respondents alleged, the parties were to take a breather, do what was needed to be done, and then decide whether to terminate the contracts or otherwise. (para 27)

(5) The respondents' conduct of retaining part of the consideration sum paid by the appellants for the purchase of the second respondent did not help the respondents' case and gave the indication that they had not abandoned the composite agreements. In their letter to KLSE on the new profit-sharing agreement between themselves and the appellants, the respondents stated that the RM4.1 million was deposited on an interest-free basis for the duration of the suspension agreement. The retention of the returnable deposits free of interest for a period of over five years militated against the respondents' argument that the contracts had lapsed. (paras 31 & 32).

(6) Financial considerations could not be discounted as one of the reasons why the respondents did not terminate the composite agreements as the respondents, under their profit-sharing agreement with the appellants, were guaranteed RM500,000 per month payment (RM6 million per year) and RM25,000 as rental for the mill. (para 33)

(7) It was only on 28 November 2007, ie, more than five years later, that the first respondent finally served notice of termination of the composite agreements and offered to tender the refund of the RM4.1 million deposit. By then, all the conditions precedent had been fulfilled. (para 34)

[Setting aside all orders of the Court of Appeal and reinstating the orders of the High Court; reinstating the decree of specific performance, dismissing the counterclaim and ordering the balance sum of RM48.9 million to be refunded within one month of the date of the order.]

Bahasa Malaysia Translation Of Headnotes

Perayu-perayu dan responden-responden memasuki tiga perjanjian (`perjanjian-perjanjian tersebut') untuk perayu-perayu membeli kesemua modal berbayar responden kedua dan, dalam proses tersebut, memperolehi milikan terhadap tanah pertanian, kilang mesin-mesin tertentu (`aset-aset') yang sepatutnya dipindah milik kepada responden kedua. Aset-aset tersebut pada asalnya ditawarkan oleh Pentadbir-Pentadbir Khas (`PK') di bawah Akta Pengurusan Danaharta Nasional Berhad 1998 kepada responden pertama sebagai sebahagian daripada wang penyelesaian yang dihutangkan kepadanya oleh penggadai aset-aset tersebut. Walau bagaimanapun, responden pertama meminta PK untuk memindah milik aset-aset di bawah penamanya, responden kedua. Di bawah perjanjian-perjanjian tersebut, yang mana melibatkan jumlah balasan sebanyak RM53 juta, perayu-perayu membayar kepada responden-responden RM4.1 juta sebagai deposit. Perjanjian-perjanjian tersebut adalah tertakluk kepada penunaian beberapa syarat-syarat awalan oleh responden-responden iaitu, menguruskan pindah milik aset-aset oleh PK responden kedua tanpa apa-apa bebanan dan mendapatkan kelulusan-kelulusan daripada Pihak Berkuasa Negeri dan Jawatankuasa Pelaburan Asing untuk memindah milik aset-aset tersebut. Berikutan pemeteraian perjanjian-perjanjian tersebut, responden pertama memindahkan pengurusan aset-aset tersebut kepada perayu-perayu dan penama-penama mereka di bawah pengurusan perkongsian keuntungan yang di bawahnya responden-responden dijamin RM500,000 sebulan (RM6 juta setahun) dan tambahan RM25,000 bagi sewa kilang tersebut. Tujuh bulan selepas perjanjian-perjanjian tersebut ditandatangani dan responden-responden mengeluarkan surat kepada perayu-perayu (`surat') mengesahkan perjanjian bersama mereka "... that for the moment each of us shall be entitled, but reserved our respective rights, to terminate the overall arrangement and understanding (including the Shares Agreement of 5 April 2002 which lapsed on 5 October 2002 since all relevant approvals have not been obtained) to enable each of us to consider our respective positions". Mempertimbangkan surat tersebut sebagai berniat untuk meletakkan masa penyelesaian sebagai terbuka untuk membolehkan responden pertama memenuhi syarat awalan tersebut, perayu-perayu memohon untuk menyelesaikan perjanjian-perjanjian tersebut, dengan membayar kepada responden-responden, baki harga belian yang masih tertunggak di bawahnya. Responden-responden menolak cadangan tersebut. Mereka menganggap perjanjian-perjanjian tersebut sebagai tamat disebabkan kegagalan mereka memenuhi syarat-syarat awalan dalam tempoh yang ditetapkan. Mereka juga menganggap surat tersebut sebagai `suspension agreement' untuk membolehkan pihak-pihak merundingkan semula perjanjian baru bagi jualan aset-aset. Perayu-perayu menyaman bagi pelaksanaan spesifik perjanjian-perjanjian tersebut. Responden-responden menuntut balas bahawa perjanjian-perjanjian tersebut adalah batal dan tidak mempunyai kesan undang-undang. Mahkamah Tinggi memberikan penghakiman kepada perayu-perayu. Atas rayuan, Mahkamah Rayuan (`MR') mengenepikan dekri pelaksanaan spesifik dan memerintahkan Mahkamah Tinggi mendengar tuntutan balas tersebut. Tuntutan balas tersebut ditolak oleh Mahkamah Tinggi. Dalam keputusannya, MR menyatakan bahawa Mahkamah Tinggi telah terkhilaf dalam memerintahkan pelaksanaan spesifik apabila perjanjian-perjanjian tersebut masih tertangguh dan apabila syarat-syarat awalan tidak dipenuhi. MR membuat pemerhatian bahawa responden-responden masih menyimpan sebahagian deposit yang telah dibayar oleh perayu-perayu dan kemudian meneruskan untuk mengurus dan mengendalikan bersama aset-aset "by virtue of the 15 November 2002 letter which governed the further relationship between the parties after the suspension of the agreements". Perayu-perayu memperolehi kebenaran untuk merayu ke Mahkamah Persekutuan atas persoalan, antara lain, sama ada ss. 32 hingga 34 Akta Kontrak 1950 (`AK') terpakai kepada kontrak yang tertangguh yang mengandungi syarat awalan untuk dipenuhi.

Diputuskan (membenarkan rayuan dengan kos)

Oleh Suriyadi HMP menyampaikan penghakiman mahkamah:

(1) Seksyen-seksyen 32, 33 dan 34 AK terangkum di bawah Bahagian IV yang terangkum di bawah `kontak kontingen' dan oleh itu persoalan yang dikemukakan dijawab secara afirmatif.

(2) MR tersalah arah dalam menyatakan bahawa syarat-syarat awalan masih belum dipenuhi. Pernyataan fakta-fakta yang dipersetujui menunjukkan bahawa syarat awalan yang penting telah dipenuhi jauh sebelum surat 15 November dikeluarkan.

(3) Notis pembatalan perjanjian hanya diserahkan kepada perayu-perayu pada 28 November 2007, yang mana pada masa tersebut, syarat awalan telah pun dipenuhi. Dengan pemenuhan syarat awalan, apa yang tinggal hanyalah pelaksanaan. Tidak ada sebab untuk responden-responden menyangkal secara sah dekri pelaksanaan spesifik selepas halangan-halangan telah diselesaikan dalam hal keadaan kes. Alasan untuk surat 15 November 2002 lenyap dengan pemenuhan syarat awalan tersebut.

(4) Menilai tindakan responden-responden dan mentafsir surat tersebut, tidak ada pada bila-bila masa pun, responden-responden ada menyatakan bahawa gabungan perjanjian-perjanjian tersebut adalah batal atas alasan kegagalan memenuhi syarat-syarat awalan. Sebaliknya, responden-responden mendakwa, pihak-pihak perlu mengambil masa, lakukan apa yang perlu dilakukan dan kemudian memutuskan sama ada hendak membatalkan kontrak-kontrak atau sebaliknya.

(5) Tindakan responden-responden menyimpan sebahagian jumlah balasan yang dibayar oleh perayu-perayu bagi belian responden kedua tidak membantu kes responden-responden dan memberikan indikasi bahawa mereka tidak mengendahkan perjanjian-perjanjian komposit tersebut. Dalam surat mereka kepada BSKL berkaitan perjanjian perkongsian keuntungan baru antara mereka dan perayu-perayu, responden-responden menyatakan bahawa jumlah RM4.1 juta didepositkan atas dasar tanpa faedah bagi tempoh penangguhan perjanjian tersebut. Penyimpanan deposit tanpa faedah yang boleh dikembalikan bagi tempoh melebihi lima tahun menyekat hujahan responden-responden bahawa kontrak-kontrak tersebut telah tamat.

(6) Balasan kewangan tidak boleh diketepikan sebagai salah satu alasan mengapa responden-responden tidak membatalkan perjanjian-perjanjian komposit tersebut kerana responden-responden, di bawah perjanjian perkongsian keuntungan dengan perayu-perayu, dijamin bayaran RM500,000 sebulan (RM6 juta setahun) dan RM25,000 sebagai sewa kilang tersebut.

(7) Hanya pada 28 November 2007, iaitu lebih lima tahun kemudian, barulah responden pertama menyerahkan notis pembatalan perjanjian-perjanjian komposit dan menawarkan tender untuk pengembalian deposit RM4.1 juta. Dalam tempoh tersebut, kesemua syarat awalan telah dipenuhi.

[Mengenepikan kesemua perintah Mahkamah Rayuan dan menghidupkan semula perintah-perintah Mahkamah Tinggi; menghidupkan semula dekri pelaksanaan spesifik, menolak tuntutan balas dan memerintahkan baki jumlah sebanyak RM48.9 juta dikembalikan dalam tempoh satu bulan dari tarikh perintah.]

Case(s) referred to:

Central Bank of India v. Hartford Fire Insurance AIR 1965 SC 1288 (refd)

Ideal City Development Sdn Bhd v. Dynamic Mould Sdn Bhd [2003] 3 CLJ 201 CA (refd)

Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98 (refd)

Kamla Devi v. Takhatmal AIR 1964 SC 859 (refd)

Morello Sdn Bhd v. Jaques (International) Sdn Bhd [1995] 2 CLJ 23 FC (refd)

National Land Finance Co-operative Society Ltd v. Sharidal Sdn Bhd [1983] 2 CLJ 76; [1983] CLJ (Rep) 282 FC (refd)

Setapak Heights Development Sdn Bhd v. Tekno Kota Sdn Bhd [2006] 2 CLJ 337 CA (refd)

Legislation referred to:

Contracts Act 1950, ss. 32, 33, 34

Counsel:

For the appellants - Cyrus Das (A Iruthaya Raj & Capt Abdul Razak Hashim with him); M/s Raj Selva & Co

For the respondents - DP Naban (Logan Sabapathy, Ang Hean Leng & Yong Shih Han with him); M/s Logan Sabapathy & Co

[Appeal from Court of Appeal; Civil Appeal No: A-02-1449-2011]

Reported by Ashok Kumar

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