We refer to your letter dated +++
Kindly be informed that the alleged +++ are not within the scope of +++
Indeed, we have taken all necessary steps to +++
We further deny the +++’s claims for the sum of +++ in its entirety as the alleged amount is wholly unsubstantiated and, in any event, excessive.
Therefore, you shall not release the sum of ++++, being +++.
Anand Raj Giri A/L Haripasar Giri v Country Garden Danga Bay Sdn Bhd
The brief facts are as follows:-
11–10–2017 Purchaser signed the Sales Form and Schedule H SPA (“SPA”) for the purchase of a property worth RM670,380. Paid Deposit of RM10,000.
9–11–2017 Purchaser made part payment to the Developer.
16–4–2018 Purchaser made another 2 part payments. Total paid to Developer at this stage is RM80,445.20.
7–8–2018 Developer dated the SPA.
On or around August 2018, Purchaser did not want to continue with the Purchase, citing financial issues.
18–1–2019 Purchaser signed the Deed of Revocation sent to him by the Developer. In the Deed of Revocation, there is a clause that allows the Developer to forfeit 10% of the Purchase Price (same substantial remedy as in Clause 11 (2) of the SPA).
20–8–2019 Purchaser commenced an action against the Developer.
26–9–2019 Developer refunded RM8,916.68 to the Purchaser, after deducting RM67,038.00 and RM4,491 as legal fees incurred by the Developer which arose from the purchase of the property.
The learned Magistrate held for the Purchaser/Plaintiff.
On appeal to the High Court, the learned Judicial Commissioner allowed the appeal and held for the Developer.
Dissatisfied, the Purchaser/Plaintiff appealed to the Court of Appeal.
The issues which were raised before the Court of Appeal were essentially:-
(a) Whether a Purchaser under a Schedule H SPA can cancel the SPA 2 years after signing the same, in reliance of a Sales Form that was signed by the Purchaser?
(b) Is the Purchaser entitled to claim for a full refund of Deposit paid to the Developer in reliance of the Sales Form?
(c) Whether the Deed of Revocation is valid and enforceable?
The solicitors for the Plaintiff/Purchaser submitted that:-
(a) The learned Judicial Commissioner in holding that the Purchaser in refusing to perform the SPA, has repudiated the SPA, and therefore the Developer elected to terminate the SPA, is plainly wrong because:-
(i) This was not pleaded by the Defendant in its pleadings;
(ii) The learned Judicial Commissioner made a finding that is contrary to the testimony of witnesses;
(iii) In making a finding that the Purchaser has repudiated the SPA and the Developer has elected to terminate the SPA, the learned Judicial Commissioner referred to Clause 11 (1) (c) SPA.
(iv) The 30-day notice requirement in Clause 11 (2) SPA has to be fulfilled before the Developer can terminate the SPA.
(v) Clause 11 is immaterial. The Developer never terminated the SPA. The precondition was never fulfilled.
(b) The Deed of Revocation should not be accepted because:-
(i) it was not in compliance with Clause 11 (2) SPA, and is consequently not valid.
(ii) it was never signed by the Defendant.
(iii) There was no evidence to show that the Deed of Revocation was agreed by the Developer. RM8,916.68 was only refunded to the Purchaser after this Suit was commenced.
(c) On the Sales Form, 2 issues were raised:-
(i) Whether Clause (f) is applicable?
There is no conflict between the Sales Form and the SPA, because it deals with a different situation — Sales Form caters to a cancellation by the Purchaser, while Clause 11 SPA deals with situation where termination by the Developer.
(ii) Does the SPA supersede the terms of the Sales Form?
The Sales Form was intended to exist together with the SPA, therefore, there was no conflict between the SPA and the Sales Form.
On behalf of the Developer, we submitted the following in relation to the SPA:-
(a) The SPA took effect on 11.10.2017. Refer to PJD Regency (Federal Court Decision).
(b) The SPA, being a Statutory Agreement, prevails over the Sales Form.
(c) The Sales Form is no longer applicable once the SPA is signed.
(d) If we were to refer to Clause (i) of the Sales Form, it “…will be construed with the provisions of the SPA…” and “in the event of any conflict, the provisions of the SPA shall prevail.”
(e) Clause (f) of the Sales Form states that “…in event of cancellation… charge 5% deposit as administrative fee and balance of deposit will be refunded.” However, Clause (f) catered for a scenario where the SPA has not been signed, because Clause (b) states that the Purchaser needs to sign the SPA in 7 days.
(f) Further, the reference to the word “deposit” in Clause (f) should be read together with Clause (a) of the Sales Form, which states that the deposit refers to the sum of RM10,000 and not any other sum (that is in the SPA).
Further, on the Deed of Revocation, we submitted that if only a situation under Section 8A of the Housing Development (Control and Licensing) Act 1966 occurs, i.e., if the Developer abandons the project, then the Purchaser may terminate the SPA, subject to certain terms and conditions:-
(1) Notwithstanding anything contained in any agreement, a purchaser shall at any time be entitled to terminate the sale and purchase agreement entered into in respect of a housing development which the licensed housing developer is engaged in, carries on, undertakes or causes to be undertaken if-
(a) the licensed housing developer refuses to carry out or delays or suspends or ceases work for a continuous period of six months or more after the execution of the sale and purchase agreement;
(b) the purchaser has obtained the written consent from the end financier; and
(c) the Controller has certified that the licensed housing developer has refused to carry out or delayed or suspended or ceased work for a continuous period of six months or more after the execution of the sale and purchase agreement.
(Case law has impliedly shown that a Deed of Revocation signed between parties may be used as a mode of such termination, notwithstanding that the Controller’s certification is not obtained. See Cemerlang Land Sdn Bhd v Ali bin Saat & Anor and other appeals [2018] 1 MLJ 331 Court of Appeal.)
In the present case, it was the Purchaser who wanted to cancel the deal, in response to which the Developer had prepared the Deed of Revocation. Although the Deed of Revocation was not signed by the Developer, it was acted upon by the Developer when it refunded RM8,916.68 to the Purchaser.
Further, the Deed of Revocation is in compliance with Clause 11 SPA, as the substantive remedy is same, i.e., both Clause 11 SPA and Deed of Revocation provide that the Developer can forfeit 10% of the Purchase Price.
It was conceded that the Developer never issued any 30-day notice as required under Clause 11 (2) SPA, but the point here is, it would be futile for the Developer to issue any such notice, since it was the Purchaser who had decided to cancel the deal (although technically speaking he cannot do so) and he also went on to cancel the bank loan. Therefore, the 30-day notice is no longer necessary. The Developer has no other choice except to prepare the Deed of Revocation, which was duly signed by the Purchaser.
The Developer had a legitimate expectation that the SPA will be performed. It was only after 2 years of signing the SPA that the Purchaser decided not to continue with the purchase. Therefore, based on parties’ agreement, the Developer forfeited 10% of the Purchase Price RM67,038 and the legal fees borne by the Developer on behalf of the Purchaser, amounting to RM4,491.
The Learned Judicial Commissioner therefore correctly decided that the Appeal at the High Court should be allowed.
Last but not least, if this Appeal is allowed, it would potentially create a floodgate in the housing industry, where the Purchaser can simply renege on a Schedule H SPA anytime, without having to deal with any repercussions.
After listening to parties, the Court of Appeal unanimously decided that the applicable agreement has to be the SPA as prescribed, and not the Sales Form. When the Purchaser indicated his intention to cancel, the Developer had followed up with a Deed of Revocation. Therefore, the High Court was correct to point out that there was repudiation by the Purchaser, that the Developer decided to accept. A non-compliance of Clause 11 (2) SPA cannot invalidate the Deed of Revocation when the Purchaser has agreed to it. There is no appealable error, and the appeal is thereby dismissed with costs of RM5,000.00, subject to allocatur.
Mode: Summons in Chambers (Understanding: Notice of motion is only for those matters listed in the winding up rules), supported by Affidavit in Support
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Lee Shih stated on 4.12.2017 that "The Companies Act 2016 only provides for the prescribed form under section 493 for lodging the court order for termination. This is found on the SSM website. The procedure for such termination would have to be governed generally under case law as well as the Winding Up Rules 1972. The winding up rules do not explicit set out the procedure for termination (and neither does it set out the stay procedure), but I am of the view that the application can be made by way of Summons in Chambers under Rule 6 read together with Rule 7 (2) of the Winding Up Rules.
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So the story was, we applied by SIC, and proposed to make all payments to Insolvency Department.
Insolvency had no objections to a stay, pending their preparation of a report.
In the end, client had to pay fees of approximately RM115K to the Insolvency Department for the termination to be granted (fees charged by the Insolvency Department).
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Moral of the story: Don't ignore demands from creditors, if you're wound up and wish to revive the company, it would be a more challenging task.
But we managed to get the Winding Up Order terminated within 1 month of its grant, which was not bad at all.
In a relationship between a creditor and debtor, the issue of liability is always a cause of concern. This is made even more apparent when there is more than one debtor involved as the terms of liability is not necessarily clear. Among the popular issues of contention is whether the debtors’ liability is joint or joint and several. In this commentary, we will explore this artificial distinction through the recent Federal Court case of Lembaga Kumpulan Wang Simpanan Pekerja v. Edwin Cassian Nagappan @ Marie [2021] 1 LNS 928.
A suit was commenced by the Employee’s Provident Fund Board against a company and its directors, Edwin Cassian and one other, for the failure of their company to make employer contributions on behalf of its employees. A consent judgment was recorded where each of the three defendants agreed to pay arrears amounting to RM133,697.00 together with dividends and interests.
However, the judgment did not expressly specify the type of liability to be borne by them i.e. whether the defendants would be “jointly and severally” liable for the judgment sum.
When the defendants failed to comply with the terms of the judgment, the EPF Board commenced a bankruptcy action solely against Edwin Cassian who then applied to set aside the action which was allowed by the Senior Assistant Registrar of the High Court. An appeal to the judge in chambers was dismissed by the judge of the High Court.
On appeal to the Court of Appeal, the main point of contention by the EPF Board is for the court to read in the words “jointly and severally” as stipulated in Section 46 (1) of the Employees Provident Fund Act 1991 (“EPF Act”) into the judgment which reads as follows:
Joint and several liability of directors, etc
“Where any contributions remaining unpaid by a company, a firm or an association of persons, then, notwithstanding anything to the contrary in this Act or any other written law, the directors of such company including any persons who were directors of such company during such period in which contributions were liable to be paid, or the partners of such firm, including any persons who were partners of such firm during such period in which contributions were liable to be paid, or the office-bearers of such association of persons, including any persons who were office-bearers of such association during such period in which contributions were liable to be paid, as the case may be, shall together with the company, firm or association of persons liable to pay the said contributions, be jointly and severally liable for the contributions due and payable to the Fund.”
Despite the express statutory provision, this was unsuccessful in the Court of Appeal on the basis that the bankruptcy action commenced against Edwin Cassian was for the whole judgment sum, instead of only the portion owed by him.
The sole question posed before the Federal Court is on the point of law:
“Whether this Court should give effect to the liability on a “joint and several” basis as provided under Section 46 of the Employees Provident Fund Act 1991 in a situation where “joint and several” were not specially stated in the court judgment.”
The court unanimously answered in the affirmative and to analyse the court’s reasoning behind this, we must dive into the diverging authorities before it:-
In Sumathy, the court took the view that where bankruptcy proceedings were simultaneously initiated against two judgment debtors, they could not both be held liable for the whole judgment sum if the judgment did not specify that liability was joint and several.
In other words, the court cannot insert the feature of “joint and several” liability if such phrase were never inserted into the judgment in the first place.
In Kejuruteraan Bintai, Fong and four other petitioners were ordered to pay cost of RM50,000 to the company. When this was not paid, Kejuruteraan Bintai commenced bankruptcy proceedings against Fong for the sum of RM50,000. This was challenged by Fong on the basis that since the order for cost never specified that liability was joint and several, he was only liable for an equal portion of the sum with the rest of the petitioners.
Despite acknowledging the preponderance of judicial laws where unless stated otherwise, judgement debtors are regarded as jointly and severally liable under a judgment or order, the Court of Appeal abided by the doctrine of stare decisis and held that it is bound by the previous decision of Sumathy. The bankruptcy action was subsequently set aside.
The Federal Court in its reasoning drew a distinction between the intertwined terms:
Joint liability: Where two or more persons jointly promise to do the same thing. It refers to one obligation or promise and consequently, performance by one discharges all.
Joint and Several liability: Where two or more persons jointly promise to do the same thing and also severally make separate promises to do the same thing.
The important point to note is the difference in the number of promises made.
Critically, the Federal Court emphasised that the term “joint liability” in a judgment does not render liability of each of the debtors to be halved or divided into equal portion according to his interest or obligation, unless clearly and expressly stated to that effect.
The court went further and noted that although a judgment for joint and several liability does not prevent a creditor from bringing several actions against several debtors separately, if any of the debtors satisfies the whole judgment sum, the right of a creditor to bring an action against another is extinguished. This prevents double recovery by the creditor and addresses the issue of a creditor being “overpaid” in Sumathy.
In the instant appeal, Section 46 of the EPF Act has expressly made clear of the joint and several liability of the directors of a company for unpaid contributions and therefore must be fully implemented over the terms of the judgment.
Fortunately, the law is even made clearer on account of Section 44 of the Contracts Act 1950 which provides as follows:
Any one of joint promisors may be compelled to perform
(1) When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of the joint promisors to perform the whole of the promise
In short – all joint contracts essentially imposed complete accountability for the obligation on each of the promisors unless the contract expressly states otherwise. Therefore, when debts are incurred jointly, each promisor is responsible for the entire amount. There was no indication that a joint liability situation renders the obligation to be somehow halved or according to portion. This was the misconception that prevailed in Sumathy.
It is pertinent to note that the point of law in Edwin Cassian was decided in the context of Section 46 of the EPF Act which manifestly imposes joint and several liability. Nevertheless, adopting the court’s analysis above and by virtue of the statutory law provided in Section 44 of the Contracts Act 1950, it is reasonable to conclude that joint and several liability prevails in any contracts or agreement unless a judgment or order stipulates otherwise.
By: Tay & Partners - Farina Hanim
