MODULAR QUEST SDN BHD v 1. ) HARIKRISHNAN A/L KANAPATHY / K.HARIKRISHNAN 2. ) MAJU CONSTRUCTION & DEVELOPMENT SDN BHD

Case Significance

Illustrates the parol evidence rule under sections 91 and 92 of the Evidence Act 1950 in a stakeholder-deposit forfeiture dispute, and the plainly-wrong threshold for appellate intervention where a trial court relies on oral evidence contradicting the written contract.

This High Court decision is an appeal from the Sessions Court after a full trial, concerning the duties of a stakeholder and the forfeiture of an earnest deposit under a stakeholder agreement. The appellant, Modular Quest Sdn Bhd, sought the refund of a RM150,000 deposit it had paid to the first respondent, a firm of solicitors that had acted as stakeholder and had represented the second respondent, Maju Construction & Development Sdn Bhd, in the underlying transaction. The appeals were heard together with a related appeal and a third-party indemnity claim. The principal questions were whether the earnest deposit held by the stakeholder had been validly and properly forfeited, and whether the forty-five day due diligence period commenced upon receipt of all the relevant documents. A central evidential issue was that oral testimony had been led which contradicted the express terms of the written stakeholder agreement, engaging the exclusion of extrinsic evidence under sections 91 and 92 of the Evidence Act 1950, which require the terms of a contract reduced to writing to be proved by the document itself and exclude evidence of an inconsistent oral agreement. The court also addressed the principle that a variation of an agreement requires valid consideration. Applying appellate principles, the court held that appellate intervention was warranted because the trial judge had been plainly wrong in the findings made, having relied on oral evidence that contradicted the documented terms. The court allowed the appeal and set aside the trial judge's decision, and it dealt with the third-party indemnity claim in the related proceedings. On costs, the court ordered the first respondent to pay RM20,000 to the appellant here and below, and the second respondent to pay RM5,000 to the appellant, with no order as to costs in the related appeal. The judgment is a useful illustration of the operation of the parol evidence rule under sections 91 and 92 of the Evidence Act 1950 and of the threshold for appellate interference with a trial court's findings.