ENG HAN PROPERTY SDN BHD v SALAMON RAJ A/L ADAICKALAM

Case Significance

Illustrates the grant of declaratory and consequential relief unwinding a developer-purchaser sale after a failed financing arrangement, ordering termination, removal of the charge and retransfer of title under the Contracts Act 1950 and the National Land Code, while leaving the parties to their contractual remedies.

This High Court decision at Shah Alam concerns a developer's originating summons seeking to unwind a sale of property to a purchaser following a failed financing arrangement, and the declaratory and consequential relief available under the Contracts Act 1950. A sale and purchase agreement had been executed between the plaintiff, as developer, and the proprietor of the land (who was not a party to the suit) as vendor, on one side, and the defendant, as purchaser, on the other. The defendant required financing, and a bank issued a letter of undertaking, subject to conditions, to the developer; as is customary in such agreements, the title to the land was transferred to the purchaser to enable him to charge it to the financier. When the arrangement broke down, the plaintiff commenced the originating summons under sections 56(1), 74(1), 75 and 76 of the Contracts Act 1950 and section 417 of the National Land Code, seeking a declaration that the sale and purchase agreement had been validly terminated, that the charge over the land be removed, that the title be retransferred to the original proprietor, and that any residue be refunded to the defendant. The Court rejected the argument that the plaintiff lacked locus standi to seek retransfer of the title to the original proprietor, and held that it was unnecessary to join that proprietor as a party. It allowed the consequential orders prayed for in the originating summons. The Court observed that no element of fraud or wrongdoing appeared to exist, that the outcome might seem unjust to the defendant, and that the matter was purely one of the contractual terms between the developer and the purchaser and between the purchaser and his bank, leaving the parties at liberty to pursue their contractual claims. It ordered the defendant to pay costs of RM10,000.