SIOW HON PENG v 1. ) PERMODALAN NEGERI SELANGOR BERHAD 2. ) Menteri Besar Selangor (Pemerbadanan)

Case Significance

Applies the doctrine of privity of contract to affirm the striking out of an abandoned-project purchaser's claim against State entities that were not parties to, and had no assignment or novation of, the sale and purchase agreement, notwithstanding the apparent injustice to the purchaser.

This High Court (Shah Alam) decision is a civil appeal against a Sessions Court decision striking out a purchaser's claim against two respondents in an abandoned-housing dispute, referring to the parties as they stood in the court below. The plaintiff had signed a sale and purchase agreement on 5 July 2001 to purchase a double-storey terrace house in a housing project for RM154,620, the agreement having been signed with the developer and the proprietor of the project land. The project was abandoned, and the land was subsequently acquired, the plaintiff seeking to hold the respondents — Permodalan Negeri Selangor Berhad and the Menteri Besar Selangor (Pemerbadanan) (the State's incorporated body) — liable.

The appeal turned on a preliminary issue concerning the jurisdiction of the Sessions Court and whether the respondents were successors in title and permitted assigns under the sale and purchase agreement, so as to be bound by it, and on the doctrine of privity of contract. The plaintiff's difficulty, which the court described as unfortunate, was that the respondents were not the original contracting parties.

The court heard and dismissed the appeal. In its reasons it explained that a buyer in the plaintiff's position would have been left to enforce any available in personam rights against the original developer and landowner or their successors in title. It held that the respondents were contractual appointees of the State Government of Selangor, which as the new proprietor of the project land had not been named in the suit, that the respondents were separate corporate entities from the original developer and landowner, and that there had been no assignment or novation of the rights and obligations under the sale and purchase agreement to either respondent. Consequently, the successor-in-title clause did not have the effect of compelling the respondents, as strangers to the contract, to step into the shoes of the original developer and landowner under the doctrine of privity of contract. Despite the apparent injustice to the plaintiff, the court held that the law had to be applied correctly, and that it would be futile to revive and transfer the case to the High Court. The judgment illustrates the operation of privity of contract against a purchaser in an abandoned housing project.