SYARIKAT PERTANIAN EMMAL SDN BHD vs TRACTORS MALAYSIA [1982] SDN BHD (MJLR2009a14) Yew Jen Kie,SS
[CSS 22-03 of 2005]
1
1 MALAYSIA
2 IN THE HIGH COURT IN Sabah AND SARAWAK AT SANDAKAN
3 CIVIL SUIT NO. S 22-03 OF 2005
4 BETWEEN
5 SYARIKAT PERTANIAN EMMAL SDN BHD … PLAINTIFFS
6 AND
7 TRACTORS MALAYSIA [1982] SDN BHD … DEFENDANTS
8
9
10 JUDGEMENT
11
12 1. The Defendants had three parcels of land (the Lands) held under
13 namely, CL 075413937, CL 075413964 and CL 075413973 which
14 they wanted to sell and they engaged WTW Real Estate Sdn. Bhd.
15 (“WTW”) to place an advertisement in the Borneo Post inviting
16 interested parties to make offers to purchase the Lands. The
17 Plaintiffs were most keen to buy the Lands as they are situated in
18 the vicinity of their sister company. They offered to buy the Lands
19 at RM1,600,000.00 free of encumbrances (vide of their letter dated
18th 20 August 2004).
21
22 2. After much anxious waiting and enquiry on the outcome to their
offer, the Plaintiffs received a letter dated 7th 23 October 2004 from
24 CH Williams Tahar & Wong (Sabah) Sdn. Bhd. (“CHW”) informing
25 that the Defendants had accepted the Plaintiffs’ offer and
26 requested for 5% of earnest deposit to be paid together with a letter
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2
of intent from the Plaintiffs. The letter also said that 1 other terms and
2 conditions were as stated in the draft Letter of Intent annexed to it.
3
3. The Plaintiffs accordingly issued the letter dated 11th 4 October 2004
5 containing almost all the terms and conditions as stated in the draft
6 letter of intent except for clause 4 to which some amendments
7 were made. An Alliance Bank cheque for the sum of RM80,000.00
8 being payment of 5% earnest deposit was also enclosed.
9
10 4. About a month later CHW wrote to inform the Plaintiffs that the
Defendants had rejected their offer in its letter dated 11 11 October
12 2004 and returned the Plaintiffs’ cheque.
13
14 5. It is the case for the Plaintiffs that a binding contract had been
15 formed when the Defendants accepted the Plaintiffs’ offer in the
16 letter dated 7 October 2004. Hence the Plaintiffs now seek
17 performance of that agreement.
18
19 6. The Defendants contend otherwise saying that the acceptance of
20 the Plaintiffs’ offer was subject to two conditions, namely, payment
21 of 5% earnest deposit and the terms and conditions contained in
22 the draft letter of intent which had yet to be settled between the
23 parties. The resulting contract is “stillborn” when the Defendants
24 failed to take up the counter-offer proposed by the Plaintiffs in their
25 Letter of Intent dated 11 October 204.
26
27
28
29
30
31
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3
1 ISSUES
2
3 7. The parties were unable to agree to the issues to be tried and the
4 issues shall be governed by the pleadings. The Court has identified
5 the following issues:
6 a. Was there a binding agreement between the Plaintiffs and
7 the Defendants? Related to this issue is whether the
8 acceptance of the offer by CHW a conditional or
9 unconditional acceptance?
10
11 b. Were the parties still negotiating prior to the Plaintiffs’ Letter
of Intent dated 11th 12 October 2004?
13
14 c. If there was a binding contract between the parties, whether
15 the contract was subject to the conditions precedent set out
in clauses 4, 8 and 9 in the Plaintiffs’ letter dated 11th 16 October
17 2004.
18
d. Whether the Plaintiffs’ letter dated 11th 19 October 2004
20 constitutes an offer to purchase the Lands subject to the
21 terms and conditions set out in clauses 4, 8 and 9 of the
Plaintiffs’ letter dated 11th 22 October 2004?
23
24 e. If the Plaintiffs’ letter dated 11th October 2004 constitute an
25 offer to the Defendants, was such offer accepted by the
26 Defendants?
27
28
29
30
31
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FINDINGS 1 OF THE COURT
2 Issue a – whether there is a binding contract
3 8. It is unarguable that the advertisement in the Borneo Post is merely
4 an invitation to interested parties to make offer for the purchase of
5 the Land. (See Patridge v CrIf ittenden [1968] 1 All ER 421 at
6 424).
7
9. Although the Plaintiffs’ offer in the letter dated 18th 8 August 2004
9 was addressed to WTW and the Defendants were not named in the
10 letter, since WTW was the agent engaged by the Defendants to
11 handle the sale of the Lands, the letter which was addressed to
12 WTW was as good as it had been directed to the Defendants. The
13 price offered was clearly stated as RM1.6 million.
14
15 10. It is established fact that the Defendants received six bids of which
16 only two wanted to buy all the three parcels of land. Only these
17 two bids were seriously considered by the Defendants. They were
18 the Plaintiffs and one Chin Kui Foh. The Defendants admitted that
19 they had already received the bids by Chin Kui Foh at the time the
letter dated 7th 20 October 2004 was issued.
21
11. The letter dated 7th 22 October 2004 reads:
23
24 “…….we are pleased to inform you that the registered owner,
25 Tractors Malaysia (1982) Sdn. Bhd. had accepted your offer of
26 RM1,600,000.00 for the purchase of the above properties.
27 Please make a five percent (5%) earnest deposit payable to
28 Tractors Malaysia (1982) Sdn. Bhd. together with a letter of intent
29 from your company. The other terms and conditions are as stated
30 in the attached draft letter of intent.”
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5
1
2 12. PW1 gave evidence that even before he received the letter dated
7th 3 October, 2004, he had already been informed by DW4 Chin Ket
4 Chung of CHW that he was the successful bidder and just wait for
5 the letter. True enough, the letter arrived.
6
13. PW2 testified that when DW4 delivered the letter dated 7th 7 October
8 2004 he told her that all she needed to do was to set out the terms
9 and conditions in the draft letter of intents in the Plaintiffs’
10 letterhead and sent it to the Defendants. The Plaintiffs did exactly
11 that after making some amendment to clause 4.
12
13 14. DW4 admitted that the conversation with PW1 had taken place, but
14 he was certain that he only told PW1 that the success of the
15 Plaintiffs’ bid “was subject to further confirmation in writing”. He
16 tried to add to his witness statement by saying that he mentioned
17 about the attached draft letter of intent to PW1. This, however, was
18 never put to PW1 in cross-examination thereby depriving him of the
19 opportunity to explain.
20
21 15. However, DW1 was evasive when asked in cross-examination
22 whether he agreed that the letter did not state that the offer was
23 subject to the Defendants’ confirmation. (See Q/A 266, 268, 275,
24 276 NOP)
25
26 16. The evasiveness and the non-committal answer of DW4 is to my
27 mind probably due to the fact that DW4 was aware that the
statement in 7th 28 October letter which stated that the Defendants
29 had accepted the Plaintiffs’ offer of RM1,600,000.00 is inconsistent
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with what DW4 had allegedly told PW1 i.e. that the 1 offer was still
2 subject to the Defendants’s confirmation.
3
4 17. I am inclined to believe that DW4 had told PW2 that all that the
5 Plaintiffs need to do was for the Plaintiffs to submit the letter of
6 intent with their own letter head and that DW4 did not tell either
7 PW1 or PW2 that the acceptance was subject for further
confirmation in writing. I say so because the letter dated 7th 8
9 October 2004 does not say that the acceptance was subject to any
10 confirmation or any conditions, hence the unlikelihood for DW4 to
11 have said so.
12
13 18. The Plaintiffs after having done what DW4 told them, that is, to
14 issue a letter of intent in their letter head and sent it to the
15 Defendants, PW1 instructed its solicitor Messrs Poon Hiew &
16 Associates to prepare the draft sale and purchase agreement.
17 According to PW3 Chin Shen Vui, conveyancing Clerk with Poon
18 Hiew & Associates, she contacted DW4 for the address of the
19 Defendants’ solicitor who acted for the Defendants in this deal, and
20 she was given the address of the Defendants’ solicitor in Shah
21 Alam. PW3 duly sent the draft sale and purchase agreement to the
22 Defendants’ solicitor but had not heard from them thereafter
23 despite several reminders.
24
25 19. According to DW1 Hj Mohamad Bin Yusof, when the Defendants
sent the letter dated 7th 26 October 2004, the terms and conditions of
27 the agreement have not been finalized as the Defendants had yet
28 to see the Plaintiffs’ Letter of Intent, which could include new
29 proposed terms and conditions or variations to terms and
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conditions contained in the draft letter of intent. It 1 was still subject
2 to negotiations between the parties and the Defendants would
3 need to study the Plaintiffs’ offer carefully once they received it.
4 [DW1’s witness statement paragraph 8]
5
6 20. For this reason, the Defendants disagreed with the Plaintiffs that
7 the contract was formed when the Defendants accepted the
Plaintiffs’ offer to purchase vide the letter dated 7th 8 October 2004
9 as envisaged in the case of Charles Grenier Sdn. Bhd. v Lau
10 Wing Hong [1997] 1 CLJ 625. The Defendants contended that the
11 Federal Court in Charles Grenier described the agreement
12 between the Plaintiffs and the Defendants as an “open contract”
13 because the parties to the transaction have been identified with
14 sufficient clarity. So too the property, the price and the terms they
considered essential. In the letter dated 7th 15 October 2004 in this
16 case, in addition to the parties, the price and the description of the
17 property, the Defendants had made acceptance of the contract
18 subject to the payment of a 5% earnest deposit and other essential
19 terms and conditions contained in the attached draft Letter of
20 Intent.
21
22 21. As such, the Defendants contended that it falls within the principle
23 under Crossly v Maycock [1874]43 LJ Ch 379 cited in Ayer Hitam
24 Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn. Bhd.
25 [1994] 2 MLJ 754 in that there were several matters that remained
26 to be settled between the parties.
27
28 22. My understanding of the Defendants’ contention is that there was
29 no formation of an open contract as envisaged by Charles Grenier
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as the essential terms of the agreement had yet 1 to be settled and
2 the parties were still at the negotiation stage.
3
4 23. What is an open contract? In his work “The Modern Law of Real
Property” 10th 5 Edn., the renowned writer Dr. Geoffrey Cheshire
6 pens:
7 If a contract for sale specifies merely the names of the
8 parties, a description of the property and a statement of
9 the price, it is called an open contract. When this form of
10 contract is made, the parties are bound by certain
11 obligations implied by the law.
12 [The above passage was referred to in Charles Grenier’s
13 case].
14
15 24. Is it essential that the terms of the agreement must be identified
16 and agreed to in order to form an open contract? To answer this
17 question, I find it helpful to refer to the following passage in Ayer
18 Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprises Sdn.
19 Bhd. [1994] 2 MLJ 754 @ 767B which reads:
20 “In Cavallari (ibid), the High Court of Australia said this at
21 p. 25:
22 “….While the due course of completion of a contract
23 for a sale of land is a matter of some complexity,
24 involving the doing of a number of things by both
25 parties, it is well settled that an informal or open
26 contract not dealing expressly with any of these
27 matters of detail, may be made and be binding. In
28 such a case law and equity fill in the details, so to
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9
speak, providing by way of implication 1 for whatever
2 is necessary to effectuate due performance.”
3
4 25. Further, in Charles Grenier, Gopal Sri Ram JCA said thus,
5 amongst others, with reference to “open contract”:
6 In order to give it effect, the law will, acting out of necessity
7 (see, Liverpool City Council v Irwin [1977] AC 239), imply
8 terms into the contract for sale in order to make it work. See,
9 Rojasara Ramjibhai Dahyabhai v Jani Narottamdas Lallubhai
10 [1986] 3 SCC 300, where it was held that there was to be
11 implied a contract for the sale of land a covenant on the part
12 of the vendor to do all things necessary to give effect to the
13 agreement”
14
15 26. It can be seen from what have been said in the above authorities
16 that the fact that the essential terms of the contract have yet to be
17 discussed or “settled” will not preclude the formation of a open
18 contract where the parties have intended the contract to come into
19 existence.
20
21 27. With this in mind, I proceed to determine whether there is a binding
contract formed between parties by virtue of the letter dated 7th 22
23 October 2004 and this will involve finding out whether there is
24 consensus ad idem, or the meeting of the minds of the parties that
25 a concluded contract was intended.
26
27 28. What are the factors by which existence of an agreement may be
28 inferred? The authorities show that such inference must be drawn
29 from the language the parties have used, their conduct, regard
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10
being had to the surrounding circumstances and 1 the object of the
2 contract. (See: Ayer Hitam Tin Dredging Malaysia Bhd v YC
3 Chin Enterprises Sdn. Bhd. [1994] 2 MLJ 754 @ 767B). It is also
4 necessary to look into the whole of the correspondence between
5 the parties to see if they have come to a binding agreement. (See:
6 Lau Sieng Nguong v Hap Shing Co. Ltd [1969] 1 MLJ 190]. The
7 true rule for construing an instrument is to consider what the writer
8 must have conceived that the reader would understand from it.
9 (See: Bonnewell v Jenkins [1878] 8 CH D 70). It is for the Court in
10 each case to construe the correspondence exchanged between the
11 parties and to say whether that is the result intended by the parties.
12 If the Court reaches a conclusion that the parties intended to form a
13 concluded contract, then there is an enforceable contract. (See:
14 Charles Grenier, supra).
15
16 29. Guided by the above authorities, the Court asks what would PW1
understand when he read the letter dated 7th 17 October 2004? It is
18 fair to say that when PW1 read the clear and unambiguous words,
19 “We are pleased to inform you that the registered owner, Tractor
20 Malaysia [1982] Sdn. Bhd. had accepted your offer of
21 RM1,600,000.00 for the purchase of the above properties”, he
22 would conceive it to mean that the Defendants had accepted his
offer contained in the Plaintiffs’ letter dated 18th 23 August 2004 and
24 that they intended to enter into a contract of sale with the Plaintiffs.
25
30. The next paragraph of the letter dated 7th 26 October 2004 reads
27 “other terms and conditions as per the draft letter of intend”. It does
28 not say that the acceptance is “subject to other terms and
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conditions as per the draft letter of intend” or subject 1 to any other
2 conditions.
3
4 31. The Court asked itself whether the Plaintiffs, upon reading the
5 words “the letter of intent” and “Other terms and conditions as per
6 the draft letter of intend…..” would have conceived that the
7 acceptance stated in the preceding paragraph of the letter was in
8 fact subject to the Plaintiffs issuing a letter of intent containing the
9 terms and conditions stated in the draft letter of intent attached to
10 the letter?
11
12 32. The Court is of the view that it cannot draw such an inference for in
13 doing so, it would be going against the policy of the Court, namely;
14 “the law leans in favour of upholding bargains and not in striking
15 them down willy-nilly” (per Gopal Sri Ram in Charles Grenier,
16 supara)
17
18 33. In law, a condition precedent for making the existence of a binding
19 contract must be expressly shown. (See: Bonnewell v Jenkins
20 [1878] 8 Ch D 70).
21
34. A careful perusal of the letter dated 7th 22 October 2004 shows that no
23 where it had mentioned that the acceptance was “subject to” those
24 terms or any other terms or conditions. This clearly indicates that
25 the acceptance is an unconditional acceptance.
26
27 35. The seriousness of forming a contract is also evidenced by the
28 payment of the earnest deposit by the Plaintiffs. In Damon Cia
29 Naviera SA v Hapag-Lloyd International SA [1985] 1 All ER 475,
30 Fox LJ said, amongst other, thus, “I do not feel able to agree that in
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general, where the agreement provides for 1 the payment of a
2 deposit, such payment is necessarily a prerequisite to the formation
3 of a contract…..The provision for the payment of a deposit is simply
4 a term of the contract…In the absence of special provision it does
5 not seem to me to carry with it any implication that it is a condition
6 precedent to the existence of contractual relations…….”
7
8 36. The subsequent conduct of the parties also clearly reveals that
9 both parties have intention to enter into a binding agreement. The
10 unchallenged evidence shows that PW1 soon after he had posted
11 the letter dated 11 October 2004, instructed his solicitor to prepare
12 a draft sale and purchase agreement for execution by the
13 Defendants. The conveyance clerk PW3 then issued a letter dated
13th 14 October 2004 (DBD-9) to CHW copied to the Defendants
15 requesting, amongst others, the address of the solicitors acted for
16 the Defendants in this Land deal and the next day, DW4 by fax
17 supplied the details of the Defendants’ solicitor, T.C. Yong & KF
18 Low in Petaling Jaya who handled the deal. DW4 confirmed that
19 the information about the Defendants’ solicitor in Selangor was
20 provided by the Defendants themselves to CHW (NOP Q238) and
21 that the Defendants had at least consented to the release of that
22 information to the Plaintiffs’ solicitor (NOP Q239). It should be
23 noted that the information was also supplied after the Defendants
24 had received Chin Kui Foh’s offer.
25
26 37. To my mind, if the Defendants had no intention to form an
27 agreement with the Plaintiffs at the time CHW issued the letter
dated 7th 28 October 2004 to the Plaintiffs because they were still at
29 negotiation stage, when the Plaintiffs so eagerly prepared the draft
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sale and purchase agreement and asked 1 for details of the
2 Defendants’s solicitor who handled the deal, it is reasonable to
3 expect the Defendants and their agent to tell the Plaintiffs to hold
4 the gun, so to speak, because the deal was still at the negotiation
5 stage and that the acceptance was “conditional”. The Defendants
6 did not do that, instead it consented to CHW to release the
7 information of its solicitor to the Plaintiffs’ solicitors.
8
9 38. It is partly because of DW4’s conduct in releasing the information to
10 PW4 upon her request that I found that DW4 could not have
11 informed PW2 or PW1 that the Defendants’ acceptance was
12 “subject to written confirmation”. As I had said before, if the
13 acceptance was conditional and if the parties were still negotiating,
14 the Defendants would not have permitted DW4 to release the
15 information on their solicitor in this deal. Also, DW4 could and
16 would have easily told the Plaintiff not to rush into preparing the
17 draft sale and purchase agreement as it would be a waste of time
18 as the parties were still negotiating and the Defendants had yet to
19 give their confirmation in writing.
20
21 39. Having regards to what DW4 had told PW2, that is, all the Plaintiffs
22 had to do was to send a letter of intent on the Plaintiffs’ letter head;
23 supplying the information of the Defendant’s solicitors to the
24 Plaintiffs’ solicitors, coupled with the unconditional acceptance of
25 the Plaintiffs’ offer, I found that the parties have intended that there
26 should be a binding agreement between them and indeed an open
27 contract had been formed as the parties to the transaction; the
28 price and the property as well as the essential terms are all
29 sufficiently identified.
30
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40. For the reasons stated above, my answer to Issue 1 One is in the
2 affirmative for the Plaintiffs.
3
4 ISSUES b – whether the parties were still negotiation prior to the
issuance of Plaintiffs’ letter dated 11th 5 October 2004
6
7 41. It is the Defendants’ contention the fact that the parties were still
8 negotiating is clearly evidenced by the Plaintiffs’ amendment to
Clause 4 of the Plaintiffs’ Letter of Intent dated 11th 9 October 2004.
10 The Plaintiffs’ amendment of clause 4 in fresh wordings which, in
11 the Plaintiffs’ view, was more favourable to the Plaintiffs constitutes
12 a counter-offer, and the Defendants had an option either to decline
13 or to make another counter-offer. However, the Defendants
14 subsequently declined the Plaintiffs’ counter offer.
15
16 42. DW1 testified that the Defendants intended the Plaintiffs to make a
17 formal offer to the Defendants by way of a letter of intent, which
18 contained proposed terms and conditions to be agreed between
19 the parties (DW1 witness statement paragraph 7).
20
21 43. In my opinion, the request for the letter of intent is superfluous and
22 therefore should be regarded as a mere formality. As learned
23 counsel for the Plaintiffs had rightly submitted that for a binding
24 contract to be formed, we need only one offer and one acceptance.
25 In other words, we do not need multiple or repeated offers and
26 multiple or repeated acceptance. Once an offer has been made, it
27 does not need to be “confirmed”, or “approved” or “made formal”,
28 and the same goes for acceptance.
29
30 44. As there was already an unconditional acceptance of the Plaintiffs’
offer contained in the Plaintiffs’ letter dated 18th 31 August, 2004, I am
[CSS 22-03 of 2005]
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unable to agree that the parties were still at negotiation 1 stage prior
to the issuance of the letter dated 11th 2 October 2004.
3
4 45. I am unable to agree that the amendment to Clause 4 is an
5 counter-offer which gives the Defendants an option whether to
6 accept it or to make further counter-offer. To my mind, this
7 amendment to Clause 4 does not change the fact that there was
8 already a concluded and binding contract formed between the
9 parties.
10
11 46. Based on the reasons aforesaid, my answer to Issue (b) is in the
12 negative for the Defendants.
13
14 ISSUE (c) – If there is a binding contract, whether the contract is
15 subject to the terms and conditions set out in clauses 4, 8 and 9 of
the Plaintiffs’ letter dated 11th 16 October 2004
17
18 47. For the Defendants, it is submitted that the Plaintiffs’ letter of intent
dated 11th 19 October 2004, particularly clauses 4, 8 and 9 expressed
20 an intention to enter a sale and purchase agreement and creating
21 no liability as to that future contract.
22
48. Further, the letter dated 20th 23 August 2004 from CHW to the
24 Defendants (DBA 9) informed the Defendants that “other terms and
25 conditions of the sale and purchase agreement are subject to
26 further discussion.”
27
28 49. It is the Defendants’s contention that section 4 provides that
29 earnest deposit which was paid would be forfeited unless a sale
30 and purchase agreement was executed within fourteen days of
31 acceptance by the Defendants, it is therefore absurd to suggest
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that a formal agreement would have to be executed 1 again within
2 fourteen days if all the terms and conditions have already been
3 finalized in the Letter of Intent.
4
5 50. For support, reliance was placed on Ayer Hitam Tin Dredging
6 Malaysia Bhd, supra, where the Federal Court described the letter
7 of intent as having “the characteristic of which have been described
8 by Fay J at first instance in his judgement in Turiff Construction
9 Ltd and Turiff Ltd v Regalia Knitting Mills Ltd at page 22 para 3
10 thus – “As I understand it such a letter is no more than the
11 expression in writing of a party’s present intention to enter into a
12 contract at a future date. Save in exceptional circumstances it can
13 have no binding effect.”
14
15 51. Further reliance was also placed on Lim Chia Min v Chean Sang
16 Ngeow & Another [1997] 2 CLJ 337, where the Federal Court
17 held that when parties “proposed that a formal agreement would be
18 prepared and execute”, they must mean what they say.”
19
20 52. For ease of reference, clauses 4, 8 and 9 in the draft letter of intent
annex to the letter dated 7th 21 October 2004 are reproduced as
22 follows:
23
24 “Clause 4 (wrongly numbered as 5) SALE AND PURCHASE
25 AGREEMENT: To be executed within fourteen (14) days from
26 the date of acceptance of this offer by the Vendor, failing
27 which the earnest deposit paid under this Offer to Purchase
28 shall be forfeited by the Vendor.”
29
30
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Clause 8 (wrongly 1 numbered as 9)
2 “This Offer to Purchase shall only be effective, from the date
3 of this Offer to Purchase is signed and accepted by the
4 Vendor.”
5
6 Clause 9 (wrongly numbered as 10)
7 “Subject to other terms and conditions in the sale and
8 purchase agreement to be agreed upon by both parties. “
9
10 Clause 4 as amended by the Plaintiffs reads:
11 “Clause 4 SALE AND PURCHASE AGREEMENT: To be
12 executed within fourteen (14) days from the date of
13 acceptance of this offer by the Vendor. The earnest deposit
14 paid under this offer by us shall be forfeited by the Vendor
15 unless good reason is shown as proof of the delay. Our legal
16 firm is Messrs M F Poon, Hiew & Associate and their address
17 is as follows:
18 (address of Messrs M F Poon, Hiew & Associates)
19 Please contact them for the preparation of the Sale And
20 Purchase Agreement , as we are ready to sign them.”
21
53. It will be recalled that the letter dated 7th 22 October 2004 which
23 accepted the Plaintiffs’ offer does not contain a qualifying condition
24 that the acceptance was subject to the terms and conditions of the
25 draft letter of intent. The Defendants requested the Plaintiffs to
26 issue a Letter of Intent from the Plaintiffs to the Defendants. To
27 my mind, the giving of the Letter of Intent is a merely formality as
28 the acceptance of the Plaintiffs’ offer was not subject to any terms
29 and conditions, the argument that the binding contract is subject
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to clauses 4, 8 and 9 of the Plaintiffs’ letter dated 11th 1 October 2004
2 therefore holds no water.
3
4 54. At any rate, a construction of these three clauses show that they
5 do not negate the fact that a concluded agreement that had been
6 reached between the Plaintiffs and the Defendants.
7
8 55. In respect of Clause 4 which says that the sale and purchase
9 agreement is “to be executed within fourteen (14) days from the
10 date of acceptance of this offer by the Vendor”, suffice it to say that
11 a clause such as this cannot stop a binding contract from coming
12 into being if the intention of the parties to enter a contract is already
13 clear, and the Court had under Issue (a) made a finding that there
14 was clear intention of the parties to enter into a binding contract.
15
16 56. As for Clause 8 which says that “This offer to Purchase shall only
17 be effective, from the date this Offer to purchase is signed and
18 accepted by the Vendor”, I find this clause to be meaningless and
19 should be ignored. I say so because the Defendants had by the
letter dated 7th 20 October 2004 unconditionally accepted the
Plaintiffs’ offer contained in the Plaintiffs’ letter dated 18th 21 August
22 2004. In any event, an offer is effective and does not require
23 signature or acceptance by the other party in order to be an offer.
24
25 57. As for Clause 9 which says “Subject to other terms and conditions
26 of the sale and purchase agreement to be agreed upon by both
27 parties’, I am mindful of the case of Lim Chia Min (relied on by the
28 Defendant), supra, where the Federal Court held that when parties
29 “proposed that a formal agreement would be prepared and
30 execute”, they must mean what they say.”
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1
2 58. I am of the view that Lim Chia Min’s case is distinguishable from
3 the present case. In that case the appellant had wanted to
4 purchase the respondent’s business and so executed the letter
5 AB1, paragraph 2 thereof stipulated “It is proposed that a formal
6 agreement will be executed between us within 4 (four) weeks from
7 the date hereof. Should this agreement not be finalized by 23
8 October 1990, the sum of RM5,000 shall be forfeited by you.”
9
59. Whereas in the letter dated 7th 10 October 2004 in the instant case,
11 the Defendants had unconditionally accepted the Plaintiffs’ offer,
12 subject to no other condition.
13
14 60. The reliance on Aberfoyle Plantation Ltd v Khaw Bian Cheng
15 [1960] 26 MLJ 47 is also misplaced. The contract in that case was
16 conditional upon the vendor obtaining a renewal of the even lease,
17 whereas the Defendants’s acceptance of the Plaintiffs’ offer in this
18 case is subject to no other conditions.
19
20 61. Are the Defendants allowed to rely on Clause 9 and say that all the
21 terms and conditions have yet to be finalized? In answering this
22 question, it will be helpful to refer to a dictum in Charles Grenier
23 which reads (at p 633):
24
25 “An agreement to make an agreement does not result in a
26 contract. It is for the Court in each case to construe the
27 correspondence exchanged between the parties and to say
28 whether that is the result intended by the parties. If the Court
29 reaches an opposite conclusion, then there is an enforceable
30 contract.
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Unless the approach we have stated is adopted, 1 a party to a
2 contract who, after having concluded his bargain, entertains
3 doubts as to the wisdom of the transaction may in the unfairly
4 advantageous position to invent all sorts of imaginary terms
5 upon which disagreement may be expressed when the more
6 formal document is being prepared in order to escape from his
7 solemn promise. Businessmen would find the law to be a huge
8 loop-hole and commerce would come to a virtual standstill.
9 The law leans in favour of upholding bargains and not in striking
10 them down willy-nilly…
11 And its declared policy finds expression in the speech of Lord
12 Wright in Hillas & Co. v. Arcos Ltd [1932] All ER (Rep.) 494,
13 where he said:
14 Businessmen often record the most important agreements in crude
15 and summary fashion; modes of expression sufficient and clear to
16 them in the course of their business, may appear to those
17 unfamiliar with the business far from complete or precise. It is,
18 accordingly, the duty of the court to construe such documents
19 fairly and broadly, without being, too astute or subtle in finding
20 defect, but, on the contrary, the Court should seek to apply the old
21 maxim of English law, verba ita sunt intelligenda ut res magis
22 valeat quam pereat. The maxim, however,, does not mean that the
23 Court is to make a contract for the parties, or to go outside the
24 words they have used, except in so far as there are appropriate
25 implications of law, as, for instance, the implication of what is just
26 and reasonable to be ascertained by the Court as matter of
27 machinery where the contractual intention is clear but the contract
28 is silent on some detail.
29 This principle applies not only to documents drafted by
30 laymen but also to those prepared by lawyers. See,
[CSS 22-03 of 2005]
21
Australian Broadcasting Commission 1 v Australasian
2 Performing Right Association Ltd [1973] 129 CLR 99.”
3
4 62. To my understanding, Clauses 4 and 9 do not point to an intention
5 that no contract was to come into existence until a formal sale and
6 purchase agreement had been prepared and executed, and all
7 terms and conditions of the sale and purchase agreement to be
8 agreed by the parties. Rather, in view of the clear and
9 unconditional acceptance of the Plaintiffs’ offer and the objective
10 aim of the transaction, they are indicative of an intention to merely
11 formalize the agreement already concluded between the parties.
12 Never mind that the parties have not yet expressly dealt with any of
13 the terms related to the sale, this is because in an open contract
14 the Court will implied terms and conditions to give effect to the
15 contract.
16
17 63. In law, even though no formal agreement has been executed by
18 the parties, there can still be a binding contract if, upon
19 construction of the correspondence exchanged between the
20 parties, find that the parties intended that there should be a
21 concluded contract. Where necessary the court will imply terms
22 into the contract of sale in order to give effect to it. (See: Charles
23 Grenier and Lau Seing Nguong, supra).
24
25 64. For the reasons stated above, my answer to Issue (c) is in the
26 negative for the Defendants.
27
28
29
[CSS 22-03 of 2005]
22
ISSUE (d) – Does the Plaintiffs’ Letter of Intent dated 11th 1 October
2 2004 constitute an offer to the Defendants to purchase the Lands
3 subject to the terms and conditions set out in clauses 4, 8 and 9 of
the Plaintiffs’ letter dated 11th 4 October 2004?
5
6 65. For the Defendants, it is contended that the Plaintiffs’ Letter of
Intent dated 11th 7 October 2004 is a record of the parties’ essential
8 terms and conditions and their intention to enter into a formal
9 contract at a later date and secondly, it is in effect a counter-offer
10 with a proposal variation to an essential terms. However, the
11 parties never executed the formal sale and purchase agreement
12 within the fourteen days period as the Defendants never accepted
13 the Plaintiffs’ Letter of Intent or counter-offer.
14
15 66. In Charles Grenier, supra, learned counsel for the appellant in that
16 case argued that the phrase “subject to the sale and purchase
17 agreement” appearing in the estate’s letter of 28 November 1989
18 shows that the parties were still negotiating. There were many
19 terms which the parties had not agreed upon. Some of them may
20 never be agreed when the draft agreement was prepared and
21 exchanged. Upon this premise, it was argued that there was no
22 concluded contract.
23
24 67. In rejecting that argument, Gopal Sri Ram JCA said, thus:
25
26 The phrase “subject to the sale and purchase agreement”
27 relied on by counsel for the appellant do not, in our
28 judgement, point to an intention that no contract was to come
29 into existence until a formal sale and purchase agreement
30 had been prepared and executed. Rather, they are, when
31 read in the context of the correspondence and the objective
[CSS 22-03 of 2005]
23
aim of the transaction – and this is 1 how we read them –
2 indicative of an intention to merely formalize the agreement
3 already concluded between the parties.”
4
5 68. In Bonnewell v Jenkin [1878] 8 Ch D 70, the High Court held at p
6 72 that a long series of cases has established this proposition that
7 a mere reference to a future contract is not enough to negative the
8 existence of a present one.
9
10 69. It can be seen from the authorities referred to above that even
11 where the phrase “subject to contract” has been used, the law does
12 not regard the execution of a formal agreement as something
13 critical or “magical” to the existence of a contract, but a mere
14 formality which does not affect the parties’ legal obligations. As no
such phrase was used in the Defendants’s letter dated 7th 15 October
16 2004 which accepted the Plaintiffs’ offer, all the more the reference
17 to execution of a formal sale and purchase agreement is a mere
18 formality to a binding contract which had already been formed.
19
20 70. Based on the reasons stated above, my answer to Issue (d) is in
21 the negative for the Defendants.
22
ISSUE (e) – If the Plaintiffs’ Letter of Intent dated 11th 23 October
24 2004 constituted an offer to the Defendants, was such offer
25 accepted by the Defendants?
26
27 71. Following my negative answer to Issue (d), the answer to Issue (e)
28 must necessarily be in the negative for the Defendants.
29
30
31
[CSS 22-03 of 2005]
24
1 ESTOPPEL ISSUE
2 72. Learned counsel for the Plaintiffs contended that in any event, the
3 Defendants are estopped from relying on the Letter of Intent
4 because the letter was only issued by the Plaintiffs to comply with
5 the Defendants’s requirement for formality.
6
7 73. Learned counsel for the Defendants contended otherwise.
8 According to them, the invitation to the Court to ignore the Plaintiffs’
9 Letter of Intent is effectively asking the Court to ignore the essential
10 terms and conditions being negotiated by the parties in the Letter of
11 Intent, and this would be inconsistent with the Plaintiffs’ reliance on
12 the case of Charles Greniar. Further, the Plaintiffs had not
13 regarded the draft letter of intent as a mere formality because he
14 had considered it carefully and made variation to clause 4 to make
15 it more favourable to the Plaintiffs.
16
17 74. In my judgement, this is a suitable case to draw out from the
18 armory of the law the weapon of estoppel to estoppe the
19 Defendants from relying on the Plaintiffs’ Letter of Intent. I say so
20 for the following reasons.
21
22 75. It is undisputed fact that the Defendants had sold the Lands to one
23 Chin Foh Kui for RM1.9 million. This fact was not disclosed to the
24 Plaintiffs by the Defendants and it was discovered by the Plaintiffs
25 through their own investigation.
26
76. DW1 gave evidence that when CHW issued the letter dated 7th 27
28 October 2004, the Defendants had already received the bid from
29 Chin Kui Foh. It is normally the policy of the Defendants to accept
30 the highest bid.
[CSS 22-03 of 2005]
25
77. DW3 claimed that Chin Kui Foh’s offer was initially 1 rejected by the
2 Defendants even though it was a higher offer (RM1.9 million) than
3 the Plaintiffs’ (NOP Q188, 192, 194, 199, 200, 248 and 249), but
4 when challenged that his story is only an afterthought (NOP Q202),
5 the Defendants failed to produce any documentary evidence to
6 substantiate this allegation.
7
8 78. I agree with the Plaintiffs that an adverse inference should be
9 drawn against the Defendants to the effect that if the relevant
10 documents had been disclosed to the Court, there would have
11 proved that the initial offer by Chin Kui Foh was lower than the
Plaintiffs’ offer of RM1.6 million in the letter of offer dated 18th 12
13 August 2004.
14
15 79. The subsequent sale of the Lands to Chin Kui Foh for RM19 million
16 shows that the Defendants had locked up the Plaintiffs’ offer while
17 they went hunting for a better bargain. When they found one who
18 was willing to pay RM300,000.00 more, they relied on the Plaintiffs’
19 Letter of Intent to get out of their legal obligation under the
20 concluded contract between the parties.
21
22 80. Given that all the terms which the Defendants now seeks to rely on
23 were drafted by the Defendants themselves, not by the Plaintiffs, it
24 would be unconscionable, unfair, unjust and inequitable for the
25 Defendants to first induce the Plaintiffs to write out the Letter of
26 Intent – to obey the terms dictated by the Defendants – by giving
27 the Plaintiffs impression or belief that the Defendants had agreed to
28 a binding contract, and secondly turned around to use those very
29 Letter of Intent to work against the Plaintiffs.
30
[CSS 22-03 of 2005]
26
WHETHER SPECIFIC PERFORMANCE OUGHT 1 TO BE GRANTED
2 81. The Plaintiff seeks specific performance of the contract to sell the
3 three Lands at RM1.6 million.
4
5 82. The Plaintiff’s evidence about its willingness and ability to perform
6 that contract has not been challenged by the Defence.
7
8 83. The Plaintiff’s evidence that the three Lands are uniquely valuable
9 to the Plaintiff due to their proximity to the land of the Plaintiff’s
10 sister company, Emson Sdn Bhd is also unchallenged.
11
12 84. Section 11 of the Specific Relief Act 1950 empowers the Court to
13 order specific performance of a contract when monetary
14 compensation would be an inadequate remedy.
15 “(1) Except as otherwise provided in this Chapter, the specific
16 performance of any contract may, in the discretion of the Court, be
17 enforced –
18 (c) when the act agreed to be done is such that pecuniary
19 compensation for its non-performance would not afford adequate
20 relief;”
21
22 85. Section 11(2) of the Specific Relief Act 1950 clearly says that there
23 is a presumption that in contracts for the sale of immovable
24 property monetary compensation cannot be an adequate remedy:-
25 “(2) Unless and until the contrary is proved, the court shall
26 presume that the breach of a contract to transfer immovable
27 property cannot be adequately relieved by compensation in money,
28 and that the breach of a contract to transfer movable property can
29 be thus relieved.”
[CSS 22-03 of 2005]
27
86. At trial, the Defendant has not led any evidence 1 whatsoever to
2 rebut this assumption.
3
4 87. Learned counsel for the Defendant had also informed the Court
5 that the three Lands have not been registered in the name of Chin
6 Kui Foh.
7
8 88. In light of the above, specific performance is an appropriate order.
9
10 CONCLUSION
11 89. Based on the correspondence exchanged between the Plaintiffs
12 and the Defendants and their conduct, I am satisfied that the
13 Plaintiff has proved his claim on the balance of probability and I find
14 as follows:
15
16 a. That the parties have intended to enter into a binding contract
when the Defendants vide the letter dated 7th 17 October 2004
18 made an unconditional acceptance of the Plaintiffs’ offer to
19 buy the Lands for RM1.6 million free of encumbrances and
20 that the parties were not at negotiation stage prior to the
Plaintiffs’ letter dated 11th 21 October 2004;
22
b. That the Plaintiffs’ letter dated 11th 23 October does not
24 constitute an offer to the Defendants. The issuance of the
letter dated 11th 25 October 2004 is a mere formality as there
26 was already a concluded contract formed between the
27 parties.
28
[CSS 22-03 of 2005]
28
c. That the concluded contract is not subject 1 to the Plaintiffs’
letter dated 11th 2 October 2004, particularly clauses 4, 8 and
3 9.
4
5 d. In any event, the Defendants are estopped from relying on
6 the Letter of Intent.
7
8 e. For all the reasons aforesaid, I gave judgment for the Plaintiff
9 and hereby declared that there is a binding agreement
10 between the Plaintiff and the Defendant for the sale and
11 purchase of the three lands, Sandakan Country Lease Nos
12 075413937, 075413964 and 075413973 for the total
13 consideration of RM1,600,000.00.
14
15 f. I further order for specific performance of the binding
16 agreement.
17
18 g. Costs be to the Plaintiff to be taxed unless agreed.
19
20
21 YA Puan Yew Jen Kie
22 Judicial Commissioner
Dated: 4th 23 June 2009
24
25
26
27 For Plaintiff: Mr Chen Kok On
28 Of Messrs Peter Lo & Co
29 Sandakan.
30
31
32
33
[CSS 22-03 of 2005]
29
1
2
3 For Defendant: Datuk John Sikayun
4 Of Messrs Luping & Co
5 Kota Kinabalu
6
7 Mr Alex Decena
8 Mr Lau Cheung Hoon
9 Of Messrs Jayasuriya Kah & Co
10
11 Notice: This copy of the Court’s Reasons for Judgment is subject to
12 formal revision.
13
14
15
16
17
18
19
20
21
1
1 MALAYSIA
2 IN THE HIGH COURT IN Sabah AND SARAWAK AT SANDAKAN
3 CIVIL SUIT NO. S 22-03 OF 2005
4 BETWEEN
5 SYARIKAT PERTANIAN EMMAL SDN BHD … PLAINTIFFS
6 AND
7 TRACTORS MALAYSIA [1982] SDN BHD … DEFENDANTS
8
9
10 JUDGEMENT
11
12 1. The Defendants had three parcels of land (the Lands) held under
13 namely, CL 075413937, CL 075413964 and CL 075413973 which
14 they wanted to sell and they engaged WTW Real Estate Sdn. Bhd.
15 (“WTW”) to place an advertisement in the Borneo Post inviting
16 interested parties to make offers to purchase the Lands. The
17 Plaintiffs were most keen to buy the Lands as they are situated in
18 the vicinity of their sister company. They offered to buy the Lands
19 at RM1,600,000.00 free of encumbrances (vide of their letter dated
18th 20 August 2004).
21
22 2. After much anxious waiting and enquiry on the outcome to their
offer, the Plaintiffs received a letter dated 7th 23 October 2004 from
24 CH Williams Tahar & Wong (Sabah) Sdn. Bhd. (“CHW”) informing
25 that the Defendants had accepted the Plaintiffs’ offer and
26 requested for 5% of earnest deposit to be paid together with a letter
[CSS 22-03 of 2005]
2
of intent from the Plaintiffs. The letter also said that 1 other terms and
2 conditions were as stated in the draft Letter of Intent annexed to it.
3
3. The Plaintiffs accordingly issued the letter dated 11th 4 October 2004
5 containing almost all the terms and conditions as stated in the draft
6 letter of intent except for clause 4 to which some amendments
7 were made. An Alliance Bank cheque for the sum of RM80,000.00
8 being payment of 5% earnest deposit was also enclosed.
9
10 4. About a month later CHW wrote to inform the Plaintiffs that the
Defendants had rejected their offer in its letter dated 11 11 October
12 2004 and returned the Plaintiffs’ cheque.
13
14 5. It is the case for the Plaintiffs that a binding contract had been
15 formed when the Defendants accepted the Plaintiffs’ offer in the
16 letter dated 7 October 2004. Hence the Plaintiffs now seek
17 performance of that agreement.
18
19 6. The Defendants contend otherwise saying that the acceptance of
20 the Plaintiffs’ offer was subject to two conditions, namely, payment
21 of 5% earnest deposit and the terms and conditions contained in
22 the draft letter of intent which had yet to be settled between the
23 parties. The resulting contract is “stillborn” when the Defendants
24 failed to take up the counter-offer proposed by the Plaintiffs in their
25 Letter of Intent dated 11 October 204.
26
27
28
29
30
31
[CSS 22-03 of 2005]
3
1 ISSUES
2
3 7. The parties were unable to agree to the issues to be tried and the
4 issues shall be governed by the pleadings. The Court has identified
5 the following issues:
6 a. Was there a binding agreement between the Plaintiffs and
7 the Defendants? Related to this issue is whether the
8 acceptance of the offer by CHW a conditional or
9 unconditional acceptance?
10
11 b. Were the parties still negotiating prior to the Plaintiffs’ Letter
of Intent dated 11th 12 October 2004?
13
14 c. If there was a binding contract between the parties, whether
15 the contract was subject to the conditions precedent set out
in clauses 4, 8 and 9 in the Plaintiffs’ letter dated 11th 16 October
17 2004.
18
d. Whether the Plaintiffs’ letter dated 11th 19 October 2004
20 constitutes an offer to purchase the Lands subject to the
21 terms and conditions set out in clauses 4, 8 and 9 of the
Plaintiffs’ letter dated 11th 22 October 2004?
23
24 e. If the Plaintiffs’ letter dated 11th October 2004 constitute an
25 offer to the Defendants, was such offer accepted by the
26 Defendants?
27
28
29
30
31
[CSS 22-03 of 2005]
4
FINDINGS 1 OF THE COURT
2 Issue a – whether there is a binding contract
3 8. It is unarguable that the advertisement in the Borneo Post is merely
4 an invitation to interested parties to make offer for the purchase of
5 the Land. (See Patridge v CrIf ittenden [1968] 1 All ER 421 at
6 424).
7
9. Although the Plaintiffs’ offer in the letter dated 18th 8 August 2004
9 was addressed to WTW and the Defendants were not named in the
10 letter, since WTW was the agent engaged by the Defendants to
11 handle the sale of the Lands, the letter which was addressed to
12 WTW was as good as it had been directed to the Defendants. The
13 price offered was clearly stated as RM1.6 million.
14
15 10. It is established fact that the Defendants received six bids of which
16 only two wanted to buy all the three parcels of land. Only these
17 two bids were seriously considered by the Defendants. They were
18 the Plaintiffs and one Chin Kui Foh. The Defendants admitted that
19 they had already received the bids by Chin Kui Foh at the time the
letter dated 7th 20 October 2004 was issued.
21
11. The letter dated 7th 22 October 2004 reads:
23
24 “…….we are pleased to inform you that the registered owner,
25 Tractors Malaysia (1982) Sdn. Bhd. had accepted your offer of
26 RM1,600,000.00 for the purchase of the above properties.
27 Please make a five percent (5%) earnest deposit payable to
28 Tractors Malaysia (1982) Sdn. Bhd. together with a letter of intent
29 from your company. The other terms and conditions are as stated
30 in the attached draft letter of intent.”
[CSS 22-03 of 2005]
5
1
2 12. PW1 gave evidence that even before he received the letter dated
7th 3 October, 2004, he had already been informed by DW4 Chin Ket
4 Chung of CHW that he was the successful bidder and just wait for
5 the letter. True enough, the letter arrived.
6
13. PW2 testified that when DW4 delivered the letter dated 7th 7 October
8 2004 he told her that all she needed to do was to set out the terms
9 and conditions in the draft letter of intents in the Plaintiffs’
10 letterhead and sent it to the Defendants. The Plaintiffs did exactly
11 that after making some amendment to clause 4.
12
13 14. DW4 admitted that the conversation with PW1 had taken place, but
14 he was certain that he only told PW1 that the success of the
15 Plaintiffs’ bid “was subject to further confirmation in writing”. He
16 tried to add to his witness statement by saying that he mentioned
17 about the attached draft letter of intent to PW1. This, however, was
18 never put to PW1 in cross-examination thereby depriving him of the
19 opportunity to explain.
20
21 15. However, DW1 was evasive when asked in cross-examination
22 whether he agreed that the letter did not state that the offer was
23 subject to the Defendants’ confirmation. (See Q/A 266, 268, 275,
24 276 NOP)
25
26 16. The evasiveness and the non-committal answer of DW4 is to my
27 mind probably due to the fact that DW4 was aware that the
statement in 7th 28 October letter which stated that the Defendants
29 had accepted the Plaintiffs’ offer of RM1,600,000.00 is inconsistent
[CSS 22-03 of 2005]
6
with what DW4 had allegedly told PW1 i.e. that the 1 offer was still
2 subject to the Defendants’s confirmation.
3
4 17. I am inclined to believe that DW4 had told PW2 that all that the
5 Plaintiffs need to do was for the Plaintiffs to submit the letter of
6 intent with their own letter head and that DW4 did not tell either
7 PW1 or PW2 that the acceptance was subject for further
confirmation in writing. I say so because the letter dated 7th 8
9 October 2004 does not say that the acceptance was subject to any
10 confirmation or any conditions, hence the unlikelihood for DW4 to
11 have said so.
12
13 18. The Plaintiffs after having done what DW4 told them, that is, to
14 issue a letter of intent in their letter head and sent it to the
15 Defendants, PW1 instructed its solicitor Messrs Poon Hiew &
16 Associates to prepare the draft sale and purchase agreement.
17 According to PW3 Chin Shen Vui, conveyancing Clerk with Poon
18 Hiew & Associates, she contacted DW4 for the address of the
19 Defendants’ solicitor who acted for the Defendants in this deal, and
20 she was given the address of the Defendants’ solicitor in Shah
21 Alam. PW3 duly sent the draft sale and purchase agreement to the
22 Defendants’ solicitor but had not heard from them thereafter
23 despite several reminders.
24
25 19. According to DW1 Hj Mohamad Bin Yusof, when the Defendants
sent the letter dated 7th 26 October 2004, the terms and conditions of
27 the agreement have not been finalized as the Defendants had yet
28 to see the Plaintiffs’ Letter of Intent, which could include new
29 proposed terms and conditions or variations to terms and
[CSS 22-03 of 2005]
7
conditions contained in the draft letter of intent. It 1 was still subject
2 to negotiations between the parties and the Defendants would
3 need to study the Plaintiffs’ offer carefully once they received it.
4 [DW1’s witness statement paragraph 8]
5
6 20. For this reason, the Defendants disagreed with the Plaintiffs that
7 the contract was formed when the Defendants accepted the
Plaintiffs’ offer to purchase vide the letter dated 7th 8 October 2004
9 as envisaged in the case of Charles Grenier Sdn. Bhd. v Lau
10 Wing Hong [1997] 1 CLJ 625. The Defendants contended that the
11 Federal Court in Charles Grenier described the agreement
12 between the Plaintiffs and the Defendants as an “open contract”
13 because the parties to the transaction have been identified with
14 sufficient clarity. So too the property, the price and the terms they
considered essential. In the letter dated 7th 15 October 2004 in this
16 case, in addition to the parties, the price and the description of the
17 property, the Defendants had made acceptance of the contract
18 subject to the payment of a 5% earnest deposit and other essential
19 terms and conditions contained in the attached draft Letter of
20 Intent.
21
22 21. As such, the Defendants contended that it falls within the principle
23 under Crossly v Maycock [1874]43 LJ Ch 379 cited in Ayer Hitam
24 Tin Dredging Malaysia Bhd v YC Chin Enterprise Sdn. Bhd.
25 [1994] 2 MLJ 754 in that there were several matters that remained
26 to be settled between the parties.
27
28 22. My understanding of the Defendants’ contention is that there was
29 no formation of an open contract as envisaged by Charles Grenier
[CSS 22-03 of 2005]
8
as the essential terms of the agreement had yet 1 to be settled and
2 the parties were still at the negotiation stage.
3
4 23. What is an open contract? In his work “The Modern Law of Real
Property” 10th 5 Edn., the renowned writer Dr. Geoffrey Cheshire
6 pens:
7 If a contract for sale specifies merely the names of the
8 parties, a description of the property and a statement of
9 the price, it is called an open contract. When this form of
10 contract is made, the parties are bound by certain
11 obligations implied by the law.
12 [The above passage was referred to in Charles Grenier’s
13 case].
14
15 24. Is it essential that the terms of the agreement must be identified
16 and agreed to in order to form an open contract? To answer this
17 question, I find it helpful to refer to the following passage in Ayer
18 Hitam Tin Dredging Malaysia Bhd v YC Chin Enterprises Sdn.
19 Bhd. [1994] 2 MLJ 754 @ 767B which reads:
20 “In Cavallari (ibid), the High Court of Australia said this at
21 p. 25:
22 “….While the due course of completion of a contract
23 for a sale of land is a matter of some complexity,
24 involving the doing of a number of things by both
25 parties, it is well settled that an informal or open
26 contract not dealing expressly with any of these
27 matters of detail, may be made and be binding. In
28 such a case law and equity fill in the details, so to
[CSS 22-03 of 2005]
9
speak, providing by way of implication 1 for whatever
2 is necessary to effectuate due performance.”
3
4 25. Further, in Charles Grenier, Gopal Sri Ram JCA said thus,
5 amongst others, with reference to “open contract”:
6 In order to give it effect, the law will, acting out of necessity
7 (see, Liverpool City Council v Irwin [1977] AC 239), imply
8 terms into the contract for sale in order to make it work. See,
9 Rojasara Ramjibhai Dahyabhai v Jani Narottamdas Lallubhai
10 [1986] 3 SCC 300, where it was held that there was to be
11 implied a contract for the sale of land a covenant on the part
12 of the vendor to do all things necessary to give effect to the
13 agreement”
14
15 26. It can be seen from what have been said in the above authorities
16 that the fact that the essential terms of the contract have yet to be
17 discussed or “settled” will not preclude the formation of a open
18 contract where the parties have intended the contract to come into
19 existence.
20
21 27. With this in mind, I proceed to determine whether there is a binding
contract formed between parties by virtue of the letter dated 7th 22
23 October 2004 and this will involve finding out whether there is
24 consensus ad idem, or the meeting of the minds of the parties that
25 a concluded contract was intended.
26
27 28. What are the factors by which existence of an agreement may be
28 inferred? The authorities show that such inference must be drawn
29 from the language the parties have used, their conduct, regard
[CSS 22-03 of 2005]
10
being had to the surrounding circumstances and 1 the object of the
2 contract. (See: Ayer Hitam Tin Dredging Malaysia Bhd v YC
3 Chin Enterprises Sdn. Bhd. [1994] 2 MLJ 754 @ 767B). It is also
4 necessary to look into the whole of the correspondence between
5 the parties to see if they have come to a binding agreement. (See:
6 Lau Sieng Nguong v Hap Shing Co. Ltd [1969] 1 MLJ 190]. The
7 true rule for construing an instrument is to consider what the writer
8 must have conceived that the reader would understand from it.
9 (See: Bonnewell v Jenkins [1878] 8 CH D 70). It is for the Court in
10 each case to construe the correspondence exchanged between the
11 parties and to say whether that is the result intended by the parties.
12 If the Court reaches a conclusion that the parties intended to form a
13 concluded contract, then there is an enforceable contract. (See:
14 Charles Grenier, supra).
15
16 29. Guided by the above authorities, the Court asks what would PW1
understand when he read the letter dated 7th 17 October 2004? It is
18 fair to say that when PW1 read the clear and unambiguous words,
19 “We are pleased to inform you that the registered owner, Tractor
20 Malaysia [1982] Sdn. Bhd. had accepted your offer of
21 RM1,600,000.00 for the purchase of the above properties”, he
22 would conceive it to mean that the Defendants had accepted his
offer contained in the Plaintiffs’ letter dated 18th 23 August 2004 and
24 that they intended to enter into a contract of sale with the Plaintiffs.
25
30. The next paragraph of the letter dated 7th 26 October 2004 reads
27 “other terms and conditions as per the draft letter of intend”. It does
28 not say that the acceptance is “subject to other terms and
[CSS 22-03 of 2005]
11
conditions as per the draft letter of intend” or subject 1 to any other
2 conditions.
3
4 31. The Court asked itself whether the Plaintiffs, upon reading the
5 words “the letter of intent” and “Other terms and conditions as per
6 the draft letter of intend…..” would have conceived that the
7 acceptance stated in the preceding paragraph of the letter was in
8 fact subject to the Plaintiffs issuing a letter of intent containing the
9 terms and conditions stated in the draft letter of intent attached to
10 the letter?
11
12 32. The Court is of the view that it cannot draw such an inference for in
13 doing so, it would be going against the policy of the Court, namely;
14 “the law leans in favour of upholding bargains and not in striking
15 them down willy-nilly” (per Gopal Sri Ram in Charles Grenier,
16 supara)
17
18 33. In law, a condition precedent for making the existence of a binding
19 contract must be expressly shown. (See: Bonnewell v Jenkins
20 [1878] 8 Ch D 70).
21
34. A careful perusal of the letter dated 7th 22 October 2004 shows that no
23 where it had mentioned that the acceptance was “subject to” those
24 terms or any other terms or conditions. This clearly indicates that
25 the acceptance is an unconditional acceptance.
26
27 35. The seriousness of forming a contract is also evidenced by the
28 payment of the earnest deposit by the Plaintiffs. In Damon Cia
29 Naviera SA v Hapag-Lloyd International SA [1985] 1 All ER 475,
30 Fox LJ said, amongst other, thus, “I do not feel able to agree that in
[CSS 22-03 of 2005]
12
general, where the agreement provides for 1 the payment of a
2 deposit, such payment is necessarily a prerequisite to the formation
3 of a contract…..The provision for the payment of a deposit is simply
4 a term of the contract…In the absence of special provision it does
5 not seem to me to carry with it any implication that it is a condition
6 precedent to the existence of contractual relations…….”
7
8 36. The subsequent conduct of the parties also clearly reveals that
9 both parties have intention to enter into a binding agreement. The
10 unchallenged evidence shows that PW1 soon after he had posted
11 the letter dated 11 October 2004, instructed his solicitor to prepare
12 a draft sale and purchase agreement for execution by the
13 Defendants. The conveyance clerk PW3 then issued a letter dated
13th 14 October 2004 (DBD-9) to CHW copied to the Defendants
15 requesting, amongst others, the address of the solicitors acted for
16 the Defendants in this Land deal and the next day, DW4 by fax
17 supplied the details of the Defendants’ solicitor, T.C. Yong & KF
18 Low in Petaling Jaya who handled the deal. DW4 confirmed that
19 the information about the Defendants’ solicitor in Selangor was
20 provided by the Defendants themselves to CHW (NOP Q238) and
21 that the Defendants had at least consented to the release of that
22 information to the Plaintiffs’ solicitor (NOP Q239). It should be
23 noted that the information was also supplied after the Defendants
24 had received Chin Kui Foh’s offer.
25
26 37. To my mind, if the Defendants had no intention to form an
27 agreement with the Plaintiffs at the time CHW issued the letter
dated 7th 28 October 2004 to the Plaintiffs because they were still at
29 negotiation stage, when the Plaintiffs so eagerly prepared the draft
[CSS 22-03 of 2005]
13
sale and purchase agreement and asked 1 for details of the
2 Defendants’s solicitor who handled the deal, it is reasonable to
3 expect the Defendants and their agent to tell the Plaintiffs to hold
4 the gun, so to speak, because the deal was still at the negotiation
5 stage and that the acceptance was “conditional”. The Defendants
6 did not do that, instead it consented to CHW to release the
7 information of its solicitor to the Plaintiffs’ solicitors.
8
9 38. It is partly because of DW4’s conduct in releasing the information to
10 PW4 upon her request that I found that DW4 could not have
11 informed PW2 or PW1 that the Defendants’ acceptance was
12 “subject to written confirmation”. As I had said before, if the
13 acceptance was conditional and if the parties were still negotiating,
14 the Defendants would not have permitted DW4 to release the
15 information on their solicitor in this deal. Also, DW4 could and
16 would have easily told the Plaintiff not to rush into preparing the
17 draft sale and purchase agreement as it would be a waste of time
18 as the parties were still negotiating and the Defendants had yet to
19 give their confirmation in writing.
20
21 39. Having regards to what DW4 had told PW2, that is, all the Plaintiffs
22 had to do was to send a letter of intent on the Plaintiffs’ letter head;
23 supplying the information of the Defendant’s solicitors to the
24 Plaintiffs’ solicitors, coupled with the unconditional acceptance of
25 the Plaintiffs’ offer, I found that the parties have intended that there
26 should be a binding agreement between them and indeed an open
27 contract had been formed as the parties to the transaction; the
28 price and the property as well as the essential terms are all
29 sufficiently identified.
30
[CSS 22-03 of 2005]
14
40. For the reasons stated above, my answer to Issue 1 One is in the
2 affirmative for the Plaintiffs.
3
4 ISSUES b – whether the parties were still negotiation prior to the
issuance of Plaintiffs’ letter dated 11th 5 October 2004
6
7 41. It is the Defendants’ contention the fact that the parties were still
8 negotiating is clearly evidenced by the Plaintiffs’ amendment to
Clause 4 of the Plaintiffs’ Letter of Intent dated 11th 9 October 2004.
10 The Plaintiffs’ amendment of clause 4 in fresh wordings which, in
11 the Plaintiffs’ view, was more favourable to the Plaintiffs constitutes
12 a counter-offer, and the Defendants had an option either to decline
13 or to make another counter-offer. However, the Defendants
14 subsequently declined the Plaintiffs’ counter offer.
15
16 42. DW1 testified that the Defendants intended the Plaintiffs to make a
17 formal offer to the Defendants by way of a letter of intent, which
18 contained proposed terms and conditions to be agreed between
19 the parties (DW1 witness statement paragraph 7).
20
21 43. In my opinion, the request for the letter of intent is superfluous and
22 therefore should be regarded as a mere formality. As learned
23 counsel for the Plaintiffs had rightly submitted that for a binding
24 contract to be formed, we need only one offer and one acceptance.
25 In other words, we do not need multiple or repeated offers and
26 multiple or repeated acceptance. Once an offer has been made, it
27 does not need to be “confirmed”, or “approved” or “made formal”,
28 and the same goes for acceptance.
29
30 44. As there was already an unconditional acceptance of the Plaintiffs’
offer contained in the Plaintiffs’ letter dated 18th 31 August, 2004, I am
[CSS 22-03 of 2005]
15
unable to agree that the parties were still at negotiation 1 stage prior
to the issuance of the letter dated 11th 2 October 2004.
3
4 45. I am unable to agree that the amendment to Clause 4 is an
5 counter-offer which gives the Defendants an option whether to
6 accept it or to make further counter-offer. To my mind, this
7 amendment to Clause 4 does not change the fact that there was
8 already a concluded and binding contract formed between the
9 parties.
10
11 46. Based on the reasons aforesaid, my answer to Issue (b) is in the
12 negative for the Defendants.
13
14 ISSUE (c) – If there is a binding contract, whether the contract is
15 subject to the terms and conditions set out in clauses 4, 8 and 9 of
the Plaintiffs’ letter dated 11th 16 October 2004
17
18 47. For the Defendants, it is submitted that the Plaintiffs’ letter of intent
dated 11th 19 October 2004, particularly clauses 4, 8 and 9 expressed
20 an intention to enter a sale and purchase agreement and creating
21 no liability as to that future contract.
22
48. Further, the letter dated 20th 23 August 2004 from CHW to the
24 Defendants (DBA 9) informed the Defendants that “other terms and
25 conditions of the sale and purchase agreement are subject to
26 further discussion.”
27
28 49. It is the Defendants’s contention that section 4 provides that
29 earnest deposit which was paid would be forfeited unless a sale
30 and purchase agreement was executed within fourteen days of
31 acceptance by the Defendants, it is therefore absurd to suggest
[CSS 22-03 of 2005]
16
that a formal agreement would have to be executed 1 again within
2 fourteen days if all the terms and conditions have already been
3 finalized in the Letter of Intent.
4
5 50. For support, reliance was placed on Ayer Hitam Tin Dredging
6 Malaysia Bhd, supra, where the Federal Court described the letter
7 of intent as having “the characteristic of which have been described
8 by Fay J at first instance in his judgement in Turiff Construction
9 Ltd and Turiff Ltd v Regalia Knitting Mills Ltd at page 22 para 3
10 thus – “As I understand it such a letter is no more than the
11 expression in writing of a party’s present intention to enter into a
12 contract at a future date. Save in exceptional circumstances it can
13 have no binding effect.”
14
15 51. Further reliance was also placed on Lim Chia Min v Chean Sang
16 Ngeow & Another [1997] 2 CLJ 337, where the Federal Court
17 held that when parties “proposed that a formal agreement would be
18 prepared and execute”, they must mean what they say.”
19
20 52. For ease of reference, clauses 4, 8 and 9 in the draft letter of intent
annex to the letter dated 7th 21 October 2004 are reproduced as
22 follows:
23
24 “Clause 4 (wrongly numbered as 5) SALE AND PURCHASE
25 AGREEMENT: To be executed within fourteen (14) days from
26 the date of acceptance of this offer by the Vendor, failing
27 which the earnest deposit paid under this Offer to Purchase
28 shall be forfeited by the Vendor.”
29
30
[CSS 22-03 of 2005]
17
Clause 8 (wrongly 1 numbered as 9)
2 “This Offer to Purchase shall only be effective, from the date
3 of this Offer to Purchase is signed and accepted by the
4 Vendor.”
5
6 Clause 9 (wrongly numbered as 10)
7 “Subject to other terms and conditions in the sale and
8 purchase agreement to be agreed upon by both parties. “
9
10 Clause 4 as amended by the Plaintiffs reads:
11 “Clause 4 SALE AND PURCHASE AGREEMENT: To be
12 executed within fourteen (14) days from the date of
13 acceptance of this offer by the Vendor. The earnest deposit
14 paid under this offer by us shall be forfeited by the Vendor
15 unless good reason is shown as proof of the delay. Our legal
16 firm is Messrs M F Poon, Hiew & Associate and their address
17 is as follows:
18 (address of Messrs M F Poon, Hiew & Associates)
19 Please contact them for the preparation of the Sale And
20 Purchase Agreement , as we are ready to sign them.”
21
53. It will be recalled that the letter dated 7th 22 October 2004 which
23 accepted the Plaintiffs’ offer does not contain a qualifying condition
24 that the acceptance was subject to the terms and conditions of the
25 draft letter of intent. The Defendants requested the Plaintiffs to
26 issue a Letter of Intent from the Plaintiffs to the Defendants. To
27 my mind, the giving of the Letter of Intent is a merely formality as
28 the acceptance of the Plaintiffs’ offer was not subject to any terms
29 and conditions, the argument that the binding contract is subject
[CSS 22-03 of 2005]
18
to clauses 4, 8 and 9 of the Plaintiffs’ letter dated 11th 1 October 2004
2 therefore holds no water.
3
4 54. At any rate, a construction of these three clauses show that they
5 do not negate the fact that a concluded agreement that had been
6 reached between the Plaintiffs and the Defendants.
7
8 55. In respect of Clause 4 which says that the sale and purchase
9 agreement is “to be executed within fourteen (14) days from the
10 date of acceptance of this offer by the Vendor”, suffice it to say that
11 a clause such as this cannot stop a binding contract from coming
12 into being if the intention of the parties to enter a contract is already
13 clear, and the Court had under Issue (a) made a finding that there
14 was clear intention of the parties to enter into a binding contract.
15
16 56. As for Clause 8 which says that “This offer to Purchase shall only
17 be effective, from the date this Offer to purchase is signed and
18 accepted by the Vendor”, I find this clause to be meaningless and
19 should be ignored. I say so because the Defendants had by the
letter dated 7th 20 October 2004 unconditionally accepted the
Plaintiffs’ offer contained in the Plaintiffs’ letter dated 18th 21 August
22 2004. In any event, an offer is effective and does not require
23 signature or acceptance by the other party in order to be an offer.
24
25 57. As for Clause 9 which says “Subject to other terms and conditions
26 of the sale and purchase agreement to be agreed upon by both
27 parties’, I am mindful of the case of Lim Chia Min (relied on by the
28 Defendant), supra, where the Federal Court held that when parties
29 “proposed that a formal agreement would be prepared and
30 execute”, they must mean what they say.”
[CSS 22-03 of 2005]
19
1
2 58. I am of the view that Lim Chia Min’s case is distinguishable from
3 the present case. In that case the appellant had wanted to
4 purchase the respondent’s business and so executed the letter
5 AB1, paragraph 2 thereof stipulated “It is proposed that a formal
6 agreement will be executed between us within 4 (four) weeks from
7 the date hereof. Should this agreement not be finalized by 23
8 October 1990, the sum of RM5,000 shall be forfeited by you.”
9
59. Whereas in the letter dated 7th 10 October 2004 in the instant case,
11 the Defendants had unconditionally accepted the Plaintiffs’ offer,
12 subject to no other condition.
13
14 60. The reliance on Aberfoyle Plantation Ltd v Khaw Bian Cheng
15 [1960] 26 MLJ 47 is also misplaced. The contract in that case was
16 conditional upon the vendor obtaining a renewal of the even lease,
17 whereas the Defendants’s acceptance of the Plaintiffs’ offer in this
18 case is subject to no other conditions.
19
20 61. Are the Defendants allowed to rely on Clause 9 and say that all the
21 terms and conditions have yet to be finalized? In answering this
22 question, it will be helpful to refer to a dictum in Charles Grenier
23 which reads (at p 633):
24
25 “An agreement to make an agreement does not result in a
26 contract. It is for the Court in each case to construe the
27 correspondence exchanged between the parties and to say
28 whether that is the result intended by the parties. If the Court
29 reaches an opposite conclusion, then there is an enforceable
30 contract.
[CSS 22-03 of 2005]
20
Unless the approach we have stated is adopted, 1 a party to a
2 contract who, after having concluded his bargain, entertains
3 doubts as to the wisdom of the transaction may in the unfairly
4 advantageous position to invent all sorts of imaginary terms
5 upon which disagreement may be expressed when the more
6 formal document is being prepared in order to escape from his
7 solemn promise. Businessmen would find the law to be a huge
8 loop-hole and commerce would come to a virtual standstill.
9 The law leans in favour of upholding bargains and not in striking
10 them down willy-nilly…
11 And its declared policy finds expression in the speech of Lord
12 Wright in Hillas & Co. v. Arcos Ltd [1932] All ER (Rep.) 494,
13 where he said:
14 Businessmen often record the most important agreements in crude
15 and summary fashion; modes of expression sufficient and clear to
16 them in the course of their business, may appear to those
17 unfamiliar with the business far from complete or precise. It is,
18 accordingly, the duty of the court to construe such documents
19 fairly and broadly, without being, too astute or subtle in finding
20 defect, but, on the contrary, the Court should seek to apply the old
21 maxim of English law, verba ita sunt intelligenda ut res magis
22 valeat quam pereat. The maxim, however,, does not mean that the
23 Court is to make a contract for the parties, or to go outside the
24 words they have used, except in so far as there are appropriate
25 implications of law, as, for instance, the implication of what is just
26 and reasonable to be ascertained by the Court as matter of
27 machinery where the contractual intention is clear but the contract
28 is silent on some detail.
29 This principle applies not only to documents drafted by
30 laymen but also to those prepared by lawyers. See,
[CSS 22-03 of 2005]
21
Australian Broadcasting Commission 1 v Australasian
2 Performing Right Association Ltd [1973] 129 CLR 99.”
3
4 62. To my understanding, Clauses 4 and 9 do not point to an intention
5 that no contract was to come into existence until a formal sale and
6 purchase agreement had been prepared and executed, and all
7 terms and conditions of the sale and purchase agreement to be
8 agreed by the parties. Rather, in view of the clear and
9 unconditional acceptance of the Plaintiffs’ offer and the objective
10 aim of the transaction, they are indicative of an intention to merely
11 formalize the agreement already concluded between the parties.
12 Never mind that the parties have not yet expressly dealt with any of
13 the terms related to the sale, this is because in an open contract
14 the Court will implied terms and conditions to give effect to the
15 contract.
16
17 63. In law, even though no formal agreement has been executed by
18 the parties, there can still be a binding contract if, upon
19 construction of the correspondence exchanged between the
20 parties, find that the parties intended that there should be a
21 concluded contract. Where necessary the court will imply terms
22 into the contract of sale in order to give effect to it. (See: Charles
23 Grenier and Lau Seing Nguong, supra).
24
25 64. For the reasons stated above, my answer to Issue (c) is in the
26 negative for the Defendants.
27
28
29
[CSS 22-03 of 2005]
22
ISSUE (d) – Does the Plaintiffs’ Letter of Intent dated 11th 1 October
2 2004 constitute an offer to the Defendants to purchase the Lands
3 subject to the terms and conditions set out in clauses 4, 8 and 9 of
the Plaintiffs’ letter dated 11th 4 October 2004?
5
6 65. For the Defendants, it is contended that the Plaintiffs’ Letter of
Intent dated 11th 7 October 2004 is a record of the parties’ essential
8 terms and conditions and their intention to enter into a formal
9 contract at a later date and secondly, it is in effect a counter-offer
10 with a proposal variation to an essential terms. However, the
11 parties never executed the formal sale and purchase agreement
12 within the fourteen days period as the Defendants never accepted
13 the Plaintiffs’ Letter of Intent or counter-offer.
14
15 66. In Charles Grenier, supra, learned counsel for the appellant in that
16 case argued that the phrase “subject to the sale and purchase
17 agreement” appearing in the estate’s letter of 28 November 1989
18 shows that the parties were still negotiating. There were many
19 terms which the parties had not agreed upon. Some of them may
20 never be agreed when the draft agreement was prepared and
21 exchanged. Upon this premise, it was argued that there was no
22 concluded contract.
23
24 67. In rejecting that argument, Gopal Sri Ram JCA said, thus:
25
26 The phrase “subject to the sale and purchase agreement”
27 relied on by counsel for the appellant do not, in our
28 judgement, point to an intention that no contract was to come
29 into existence until a formal sale and purchase agreement
30 had been prepared and executed. Rather, they are, when
31 read in the context of the correspondence and the objective
[CSS 22-03 of 2005]
23
aim of the transaction – and this is 1 how we read them –
2 indicative of an intention to merely formalize the agreement
3 already concluded between the parties.”
4
5 68. In Bonnewell v Jenkin [1878] 8 Ch D 70, the High Court held at p
6 72 that a long series of cases has established this proposition that
7 a mere reference to a future contract is not enough to negative the
8 existence of a present one.
9
10 69. It can be seen from the authorities referred to above that even
11 where the phrase “subject to contract” has been used, the law does
12 not regard the execution of a formal agreement as something
13 critical or “magical” to the existence of a contract, but a mere
14 formality which does not affect the parties’ legal obligations. As no
such phrase was used in the Defendants’s letter dated 7th 15 October
16 2004 which accepted the Plaintiffs’ offer, all the more the reference
17 to execution of a formal sale and purchase agreement is a mere
18 formality to a binding contract which had already been formed.
19
20 70. Based on the reasons stated above, my answer to Issue (d) is in
21 the negative for the Defendants.
22
ISSUE (e) – If the Plaintiffs’ Letter of Intent dated 11th 23 October
24 2004 constituted an offer to the Defendants, was such offer
25 accepted by the Defendants?
26
27 71. Following my negative answer to Issue (d), the answer to Issue (e)
28 must necessarily be in the negative for the Defendants.
29
30
31
[CSS 22-03 of 2005]
24
1 ESTOPPEL ISSUE
2 72. Learned counsel for the Plaintiffs contended that in any event, the
3 Defendants are estopped from relying on the Letter of Intent
4 because the letter was only issued by the Plaintiffs to comply with
5 the Defendants’s requirement for formality.
6
7 73. Learned counsel for the Defendants contended otherwise.
8 According to them, the invitation to the Court to ignore the Plaintiffs’
9 Letter of Intent is effectively asking the Court to ignore the essential
10 terms and conditions being negotiated by the parties in the Letter of
11 Intent, and this would be inconsistent with the Plaintiffs’ reliance on
12 the case of Charles Greniar. Further, the Plaintiffs had not
13 regarded the draft letter of intent as a mere formality because he
14 had considered it carefully and made variation to clause 4 to make
15 it more favourable to the Plaintiffs.
16
17 74. In my judgement, this is a suitable case to draw out from the
18 armory of the law the weapon of estoppel to estoppe the
19 Defendants from relying on the Plaintiffs’ Letter of Intent. I say so
20 for the following reasons.
21
22 75. It is undisputed fact that the Defendants had sold the Lands to one
23 Chin Foh Kui for RM1.9 million. This fact was not disclosed to the
24 Plaintiffs by the Defendants and it was discovered by the Plaintiffs
25 through their own investigation.
26
76. DW1 gave evidence that when CHW issued the letter dated 7th 27
28 October 2004, the Defendants had already received the bid from
29 Chin Kui Foh. It is normally the policy of the Defendants to accept
30 the highest bid.
[CSS 22-03 of 2005]
25
77. DW3 claimed that Chin Kui Foh’s offer was initially 1 rejected by the
2 Defendants even though it was a higher offer (RM1.9 million) than
3 the Plaintiffs’ (NOP Q188, 192, 194, 199, 200, 248 and 249), but
4 when challenged that his story is only an afterthought (NOP Q202),
5 the Defendants failed to produce any documentary evidence to
6 substantiate this allegation.
7
8 78. I agree with the Plaintiffs that an adverse inference should be
9 drawn against the Defendants to the effect that if the relevant
10 documents had been disclosed to the Court, there would have
11 proved that the initial offer by Chin Kui Foh was lower than the
Plaintiffs’ offer of RM1.6 million in the letter of offer dated 18th 12
13 August 2004.
14
15 79. The subsequent sale of the Lands to Chin Kui Foh for RM19 million
16 shows that the Defendants had locked up the Plaintiffs’ offer while
17 they went hunting for a better bargain. When they found one who
18 was willing to pay RM300,000.00 more, they relied on the Plaintiffs’
19 Letter of Intent to get out of their legal obligation under the
20 concluded contract between the parties.
21
22 80. Given that all the terms which the Defendants now seeks to rely on
23 were drafted by the Defendants themselves, not by the Plaintiffs, it
24 would be unconscionable, unfair, unjust and inequitable for the
25 Defendants to first induce the Plaintiffs to write out the Letter of
26 Intent – to obey the terms dictated by the Defendants – by giving
27 the Plaintiffs impression or belief that the Defendants had agreed to
28 a binding contract, and secondly turned around to use those very
29 Letter of Intent to work against the Plaintiffs.
30
[CSS 22-03 of 2005]
26
WHETHER SPECIFIC PERFORMANCE OUGHT 1 TO BE GRANTED
2 81. The Plaintiff seeks specific performance of the contract to sell the
3 three Lands at RM1.6 million.
4
5 82. The Plaintiff’s evidence about its willingness and ability to perform
6 that contract has not been challenged by the Defence.
7
8 83. The Plaintiff’s evidence that the three Lands are uniquely valuable
9 to the Plaintiff due to their proximity to the land of the Plaintiff’s
10 sister company, Emson Sdn Bhd is also unchallenged.
11
12 84. Section 11 of the Specific Relief Act 1950 empowers the Court to
13 order specific performance of a contract when monetary
14 compensation would be an inadequate remedy.
15 “(1) Except as otherwise provided in this Chapter, the specific
16 performance of any contract may, in the discretion of the Court, be
17 enforced –
18 (c) when the act agreed to be done is such that pecuniary
19 compensation for its non-performance would not afford adequate
20 relief;”
21
22 85. Section 11(2) of the Specific Relief Act 1950 clearly says that there
23 is a presumption that in contracts for the sale of immovable
24 property monetary compensation cannot be an adequate remedy:-
25 “(2) Unless and until the contrary is proved, the court shall
26 presume that the breach of a contract to transfer immovable
27 property cannot be adequately relieved by compensation in money,
28 and that the breach of a contract to transfer movable property can
29 be thus relieved.”
[CSS 22-03 of 2005]
27
86. At trial, the Defendant has not led any evidence 1 whatsoever to
2 rebut this assumption.
3
4 87. Learned counsel for the Defendant had also informed the Court
5 that the three Lands have not been registered in the name of Chin
6 Kui Foh.
7
8 88. In light of the above, specific performance is an appropriate order.
9
10 CONCLUSION
11 89. Based on the correspondence exchanged between the Plaintiffs
12 and the Defendants and their conduct, I am satisfied that the
13 Plaintiff has proved his claim on the balance of probability and I find
14 as follows:
15
16 a. That the parties have intended to enter into a binding contract
when the Defendants vide the letter dated 7th 17 October 2004
18 made an unconditional acceptance of the Plaintiffs’ offer to
19 buy the Lands for RM1.6 million free of encumbrances and
20 that the parties were not at negotiation stage prior to the
Plaintiffs’ letter dated 11th 21 October 2004;
22
b. That the Plaintiffs’ letter dated 11th 23 October does not
24 constitute an offer to the Defendants. The issuance of the
letter dated 11th 25 October 2004 is a mere formality as there
26 was already a concluded contract formed between the
27 parties.
28
[CSS 22-03 of 2005]
28
c. That the concluded contract is not subject 1 to the Plaintiffs’
letter dated 11th 2 October 2004, particularly clauses 4, 8 and
3 9.
4
5 d. In any event, the Defendants are estopped from relying on
6 the Letter of Intent.
7
8 e. For all the reasons aforesaid, I gave judgment for the Plaintiff
9 and hereby declared that there is a binding agreement
10 between the Plaintiff and the Defendant for the sale and
11 purchase of the three lands, Sandakan Country Lease Nos
12 075413937, 075413964 and 075413973 for the total
13 consideration of RM1,600,000.00.
14
15 f. I further order for specific performance of the binding
16 agreement.
17
18 g. Costs be to the Plaintiff to be taxed unless agreed.
19
20
21 YA Puan Yew Jen Kie
22 Judicial Commissioner
Dated: 4th 23 June 2009
24
25
26
27 For Plaintiff: Mr Chen Kok On
28 Of Messrs Peter Lo & Co
29 Sandakan.
30
31
32
33
[CSS 22-03 of 2005]
29
1
2
3 For Defendant: Datuk John Sikayun
4 Of Messrs Luping & Co
5 Kota Kinabalu
6
7 Mr Alex Decena
8 Mr Lau Cheung Hoon
9 Of Messrs Jayasuriya Kah & Co
10
11 Notice: This copy of the Court’s Reasons for Judgment is subject to
12 formal revision.
13
14
15
16
17
18
19
20
21
