Court of Appeal in Malaysia rules sale and purchase agreement continued to bind both parties as intermittent payments after completion date were paid and accepted by vendor

28 July 2022

Maskiara Property Holdings Sdn Bhd v Norisham Ibrahim [2022] 1 LNS 266

In Maskiara Property Holdings Sdn Bhd v Norisham Ibrahim, Norisham Ibrahim (“Norisham”) was the administrator of the estate of the late Ibrahim @ Abd Rahim Haji Salim (“Deceased”). By a sale and purchase agreement (“SPA”), the Deceased had agreed to sell, and Maskiara Property Holdings Sdn Bhd (“MPH”) had agreed to purchase a piece of land in Kuala Lumpur (“Land”). The SPA stipulated that the balance purchase price (“BPP”) was to be satisfied via the transfer of three pieces of properties (“Properties”) by MPH and the remaining balance was to be paid by MPH in cash within three months from the date of the SPA (“Completion Period”). MPH failed to pay the BPP within the Completion Period but made intermittent payments under the SPA between 2012 and 2016. In 2017, Norisham filed a suit against MPH and following that, MPH informed Norisham that it was unable to complete the SPA due to financial constraints and instructed its solicitors to send two separate termination letters to Norisham.

At the High Court, the Judicial Commissioner (“JC”) found MPH to be in breach of the SPA by failing to pay the remaining BPP and was estopped from alleging the invalidity of the SPA.

At the Court of Appeal (“CA”), the main grounds of appeal raised by MPH for consideration were:

  • whether there was a reasonable cause of action against MPH;
  • whether Norisham’s claim, inter alia, was against the interest of the Deceased’s estate and whether Norisham’s claim was too late and amounted to laches; and
  • whether there was a total failure by the JC to consider Norisham’s right to forfeit the deposit as liquidated damages for MPH’s breach.

The CA held that:

  • On the first ground, the crux of Norisham’s claim was to enforce the SPA by claiming the BPP through specific performance. The parties consented to extend the Completion Period by conduct as the Deceased did not terminate the SPA nor forfeit the deposit when MPH failed to pay the BPP within the Completion Period, and Norisham had affirmed the SPA by accepting the intermittent payments from MPH after the expiry of the Completion Period;
  • MPH had breached the SPA when it failed to make any payments to Norisham after March 2016. As the termination served on Norisham by MPH only came after the suit was filed against MPH, the SPA was still binding on both parties at the material time. Thus, there was a sound cause of action against MPH;
  • On the second and third grounds, having referred to section 56 of the Contracts Act 1950, Norisham, as the innocent party, has the option to rescind or affirm the SPA and MPH, as the defaulting party, cannot dictate Norisham’s course of action;
  • Furthermore, the Properties, at the material time, had been transferred to third parties and were beyond Norisham’s control. Therefore, it would be almost impossible to return the Properties to MPH as required under Clause 8 of the SPA or as prayed in MPH’s counterclaim. Thus, there was no failure by the JC in considering Norisham’s right under Clause 8 of the SPA.

As such, the CA found no merits in MPH’s appeal and affirmed the decision of the High Court.