Kenny Sim Chun Wei v Kuan Chen-Fui

Case Significance

Holds that in the regulated estate-agency sector an agreement to share professional fees or revenue with a person who is not a registered estate agent is prohibited by rule 91(1) of the Valuers, Appraisers and Estate Agents Rules 1986 and void under section 24 of the Contracts Act 1950, and cannot be enforced however genuinely intended; the appeal was dismissed with costs.

This Court of Appeal decision concerns the enforceability of an alleged oral revenue-sharing agreement arising from an estate-agency business, and the effect of statutory regulation on such an arrangement. The appellant and the respondent are natural persons referred to here by their roles; the respondent was the sole proprietor of a registered estate agency, MIP Properties, later replaced by MIP Properties Sdn Bhd, which was registered with the Board of Valuers, Appraisers, Estate Agents and Property Managers. The appellant, a real estate negotiator engaged by the agency, claimed a share of the revenue from various property projects under what he said was an oral revenue-sharing agreement.

The High Court found that such an oral agreement did exist, but held it to be illegal and unenforceable. The vice lay in the profit-sharing: sharing profits with a person who is not a registered estate agent contravenes rule 91(1) of the Valuers, Appraisers and Estate Agents Rules 1986, and a contract that offends that prohibition is void under section 24 of the Contracts Act 1950. The court also held that section 22C of the Valuers, Appraisers, Estate Agents and Property Managers Act 1981 — a provision the appellant sought to rely upon — was inapplicable to his claim.

On appeal, the Court of Appeal found no basis for appellate intervention. It held that the Judicial Commissioner was "not plainly wrong in any way warranting" interference, and that any incentive payment to the appellant could only have been pursuant to a gratuitous promise for the services he rendered as a head of department, rather than under an enforceable revenue-sharing agreement. The court dismissed the appeal and affirmed the High Court's decision, ordering the appellant to pay costs of RM30,000.

The judgment is a valuable statement on illegality in the regulated estate-agency sector: an agreement to share professional fees or revenue with a person who is not a registered estate agent is prohibited by rule 91(1) of the 1986 Rules and void under section 24 of the Contracts Act 1950, and such an agreement cannot be enforced however genuinely the parties intended it.