top of page

KYB Case Update: High Court Orders Vendor & Vendor's Solicitors To Refund Payments to Purchaser

HIGH COURT ORDERS VENDOR AND VENDOR’S SOLICITORS TO REFUND DEPOSITS & PART-PAYMENTS TO PURCHASER AFTER FAILURE TO FULFILL CONDITIONS PRECEDENT


Introduction


On 06.09.2022, the High Court in Kuala Lumpur High Court Civil Suit No. WA-22NCVC-247-04/2022: R&A Trading (K.L.) Sdn. Bhd. v. (1) Jiwa Rakyat Sdn. Bhd. (2) Lim Ah Lim (3) Chan Yong Sin & (4) Tetuan Abdul Aziz Rahim & Co. entered summary judgment against the 1st Defendant/Vendor (“the Vendor”) and the 4th Defendant/Vendor’s solicitors (“the Vendor’s Solicitors”) for the return of deposits and part-payments made by the Plaintiff/Purchaser (“the Purchaser”) on the following terms:-


(1) the Vendor shall forthwith refund the sum of RM2,000,000.00 to the Purchaser, being the total sum of monies paid by the Purchaser to the Vendor pursuant to a sale and purchase agreement; and


(2) the Vendor’s Solicitors shall forthwith refund the sum of RM814,342.30 to the Purchaser, being the total sum of monies paid by the Purchaser to the Vendor’s Solicitors pursuant to a sale and purchase agreement.


This Case Update shall highlight some key aspects of the Grounds of Judgment of the High Court dated 31.01.2023 as reported in R&A Trading (KL) Sdn. Bhd. v. Jiwa Rakyat Sdn. Bhd. dan lain-lain [2023] MLJU 777; [2023] MLRHU 580.


Material Background Facts


In 2011, the Purchaser and the Vendor entered into a sale and purchase agreement in respect of a plot of land (“the Sale & Purchase Agreement”). Pursuant thereto, the Vendor was contractually obliged to fulfil several conditions precedent, including to obtain sub-division of the said land duly converted to commercial status and to obtain approval from Lembaga Lebuhraya Malaysia for ingress and egress to and from the said land (“the Conditions Precedent”), whereafter the Purchaser shall pay the balance purchase price within three (3) months therefrom.


During the period 2011 to 2016, upon the Vendor’s and the Vendor’s Solicitors’ requests, the Purchaser made the following advance payments towards deposits and balance purchase price:-


(1) payments in the total sum of RM2,000,000.00 in favour of the Vendor; and


(2) payments in the total sum of RM814,342.30 in favour of the Vendor’s Solicitors.


Despite a grand total of thirty-seven (37) extensions of time granted by the Purchaser (during the period 2012 to 2021), the Vendor failed to fulfil the Conditions Precedent, leaving the Purchaser with no alternative but to terminate the Sale & Purchase Agreement and demand for a refund of all monies paid.


Upon further inquiry, it was later discovered by the Purchaser that the Vendor had ceased to be the registered proprietor of the said land as at 14.11.2017.


Further, the Purchaser also discovered that the Vendor and the Vendor’s Solicitors were previously found liable for fraud and negligence in respect of the same parcel of land by the Kuala Lumpur High Court (as reported in WT Development Sdn. Bhd. v. Chow Cho Tai & Ors. [2019] 1 LNS 2039).


The Purchaser then commenced a claim against the Vendor, the Vendor’s Directors and the Vendor’s Solicitors for:-


(1) a refund of the sum of RM2,814,342.30 from the Vendor and the Vendor’s Solicitors (“Claim for Refund of Monies Paid”); and


(2) damages for conspiracy to defraud.


After close of pleadings, the Purchaser filed an application for summary judgment in respect of the Claim for Refund of Monies Paid.


Summary Judgment – No Trial Required


When an action is commenced in Court by way of a writ of summons, the ordinary procedure is for the suit to proceed to full trial where each party would have an opportunity to produce their respective witnesses to put forward their case. The summary judgment procedure is an exception to this rule. Here, an applicant would invite the Court to determine a dispute on affidavit evidence alone without the need for a full trial.


The basic requirements for an applicant to fulfil before applying for summary judgment are:- (i) the defendant must have entered an appearance; (ii) the statement of claim must have been served on the defendant; and (iii) the affidavit in support of the summary judgment application must comply with the requirements under Order 14 Rule 2 of the Rules of Court 2012. Once an applicant fulfils these basic requirements, the burden will shift to the defendant to raise ‘bona fide triable issues’ to warrant a full trial. If the Court finds that there are no ‘bona fide triable issues’ raised, the Court will accordingly allow the application for summary judgment.


High Court’s Grounds for Allowing Summary Judgment against Vendor and Vendor’s Solicitors


First, the High Court acknowledged that it was undisputed (upon the pleaded cases of parties and the evidence submitted) that a sum of RM2,000,000.00 was paid by the Purchaser to the Vendor and a further sum of RM814,342.30 was paid by the Purchaser to the Vendor’s Solicitors, both being payments of deposits and advance part-payments towards the purchase price pursuant to the Sale & Purchase Agreement.


Secondly, the High Court observed that it was also undisputed that the Vendor ceased to be the registered proprietor of the said land and has failed to fulfil the Conditions Precedent – therefore, pursuant to the express terms of the Sale & Purchase Agreement, all monies paid by the Purchaser to the Vendor ought to be refunded to the Purchaser.


Thirdly, the High Court referred to a string of authorities where it was previously held that a claim for a refund of monies paid premised on a vendor’s failure to fulfil conditions precedent are plain and obvious cases which may be disposed of by way of summary judgment.


On the above bases, the High Court held that the Vendor breached the Sale & Purchase Agreement and ordered the Vendor to immediately refund all monies paid to the Purchaser.


Specifically as against the Vendor’s solicitors, the High Court found that they were liable to refund all monies paid by the Purchaser as these monies were received by the Vendor’s Solicitors in their capacity as solicitors for the Vendor. And this obligation, the High Court held, subsists irrespective of whether the monies have been released to third parties and irrespective of whether the monies were released upon the Vendor’s instructions (of which there was no evidence tendered by the Vendor’s Solicitors).


Key Takeaways


The above decision ought to be of interest to vendors, purchasers and their respective solicitors, as it reaffirms a few established principles, namely:-


  • where a vendor fails to fulfil conditions precedent under a sale and purchase agreement, the vendor will be liable to refund all monies paid should the purchaser exercise its option to terminate the agreement;


  • where a firm of solicitors undertakes to accept and/or hold deposits or part-payments pending a fulfilment of an obligation by their client, these monies ought not to be released to their client and/or third parties, and can only be released in accordance with the express terms of the agreement;


  • where a firm of solicitors releases monies to third parties with (or without) their client’s instructions, they may still be held personally liable to refund the same if the agreement is terminated (or does not materialise) at a later date; and


  • the summary judgment procedure remains an economical and expeditious option available to aggrieved purchasers who seek a refund of all monies paid following the termination of a sale and purchase agreement.


Our Managing Partner, Edward Kuruvilla, successfully represented the Purchaser as external Counsel in the above proceedings. The full Grounds of Judgment have since been reported and may be accessed at R&A Trading (KL) Sdn. Bhd. v. Jiwa Rakyat Sdn. Bhd. dan lain-lain [2023] MLJU 777; [2023] MLRHU 580.


Whilst no appeal has been lodged by the Vendor against the above decision, the Vendor’s Solicitors have filed an appeal which is scheduled to be heard this year.


This article is authored by Edward Kuruvilla who leads the Firm’s Dispute Resolution practice group. For more information, please feel free to contact Edward Kuruvilla at edward@kyblegal.com or visit his Profile at www.kyblegal.com/edward.


To download the article, please click on the link below.

KYB Case Update - High Court Orders Vendor and Vendor's Solicitors to Refund Payments to P
.
Download • 753KB




55 views0 comments

Comentarios


bottom of page