SILVERON BUILDERS SDN BHD v YHL PROPERTY SDN BHD

Case Significance

Confirms that compensation for a wrongful caveat under section 329(1) of the National Land Code rests on a compensatory principle and may extend to consequential financing costs a landowner pays to indemnify a developer, even without an express indemnity clause in the underlying agreement.

This Court of Appeal decision concerns the measure of compensation payable for a wrongfully lodged caveat under section 329(1) of the National Land Code, and whether a landowner may recover financing costs incurred as a result. The respondent had entered into a joint-venture agreement with a developer for a project on its land. The appellant wrongfully lodged a private caveat on that land, and, despite a written notice from the respondent's solicitors warning that substantial damages could follow, declined to withdraw it, prompting the respondent to apply to the High Court for its removal. The High Court ordered the caveat removed and directed that the losses suffered as a result be assessed and paid under section 329(1). On the assessment it awarded the respondent RM748,931.37, representing the additional financing costs that the respondent had paid to indemnify the developer for the delay and higher financing costs caused by the wrongful caveat. The appellant appealed, the central question being whether it was liable to compensate the respondent for that sum, given that there was no express indemnity clause in the joint-venture agreement obliging the respondent to bear the developer's additional financing costs. The Court held that the respondent was entitled to recover the amount it had paid to indemnify the developer, notwithstanding the absence of an express indemnity clause, because the entitlement rested on the compensatory principle in section 329(1), which is directed at placing the person aggrieved by a wrongful caveat in the same financial position as if the caveat had not been lodged. Finding that the High Court judge had not erred in awarding compensation of RM748,931.37 with interest, the Court upheld the decision and dismissed the appeal with costs. The judgment is a useful illustration of the compensatory reach of section 329(1) of the National Land Code, extending to consequential financing costs flowing from a wrongful caveat.