IN THE COURT OF APPEAL, MALAYSIA
AT PUTRAJAYA
[APPELLATE JURISDICTION]
MOOT NO. OF 2012
BETWEEN
RAHMAT BULAT SDN. BHD. APPELLANT
AND
RAJESH SINAR SDN. BHD. RESPONDENT
Rahmat Bulat Sdn. Bhd (RB), a housing developer signed a sale and purchase agreement (“the agreement”) with Rajesh Sinar Sdn. Bhd. (RS). In the agreement signed by both parties on 31 March 2010, RS agreed to sell and RB agreed to purchase 1,140.40 acres of land in Mukim Melaka Tengah in the state of Melaka for a price of RM3,000,000.00. After payment of the deposit (10%) and three 3 instalments amounting to RM300,000.00 towards the purchase price, in a few months time RB informed RS that they had failed to obtain a loan to pay the balance of the purchase price from any financial institution. RB also argued that they had been lawfully discharged from further performance of the agreement. RS insisted on receiving the full balance of the purchase price.
RB then commenced proceedings in the High Court for a declaration that the contract had been frustrated and consequently RB was discharged from its obligation to perform the contract. RB also sought refund of all monies paid under the contract. RS filed a counter-claim and sought for an order of specific performance of the contract, compensation or damages in addition to the order of specific performance or alternatively, damages for breach of the contract in lieu of specific performance. The learned judge dismissed RB's claims with costs. The learned judge, however, did not make an order for specific performance but in lieu, he awarded RS damages under cl 10.1 of the agreement. which read as follows:
10.1Default By The Purchaser
In the event of any breach by the purchaser of any of the provisions of this agreement the vendor shall (subject to and after the expiry of a notice in writing to the purchaser requiring the purchaser to remedy such breach(es) within thirty (30) days from the date thereof provided always that such notice is only necessary if the breach(es) does/do not involve the payment of the second instalment or the third instalment) be entitled to forfeit the first instalment and the sum equivalent to eleven per centum (11%) per annum on the third instalment or portion thereof remaining unpaid/outstanding calculated from the due date until the date of such forfeiture by way of agreed liquidated damages and the vendor's solicitors shall refund to the purchaser all other monies paid by the purchaser towards the purchase of the land (free of interest) in exchange for the titles whereupon this agreement shall terminate and cease to be of any further effect but without prejudice
to any right which either party may be entitled to against the other party in respect of any antecedent breach of this agreement.
The Learned Judge ordered the forfeiture of the deposit and a further sum of equivalent to 11%pa on the third instalment. RB challenged the trial judge's decision on the issues of frustration of the contract, the issue of RS's claims in the pleadings and the agreed liquidated damages under clause 10.1 of the agreement,
RB appealed on the grounds that:
i. the failure to obtain a loan to pay the balance of the purchase price due to the liquidity problem and Bank Negara ruling on lending to the broad property Sector was a supervening event beyond the control of the appellant.
ii. the liquidated damages awarded under cl 10.1 of the agreement is extravagant, exorbitant and unconscionable.
