KIRANA EMAS SDN BHD v TUNG KOK SING

Case Significance

Confirms that a deposit is recoverable where the conditions precedent to a share sale agreement are not fulfilled, and that an entire-agreement clause excludes collateral promises and oral representations inconsistent with the written terms.

This High Court decision at Kuala Lumpur concerns a claim for the refund of a deposit paid under a share sale agreement where the conditions precedent were not fulfilled. The plaintiff, Kirana Emas Sdn Bhd, had agreed to buy 15,000 shares in a company from the defendant for RM4 million under a share sale agreement dated 25 October 2017, paying RM250,000 as a deposit on signing. When the conditions precedent under the agreement were not fulfilled, the plaintiff sued for the return of the deposit, while the defendant counterclaimed to keep the deposit and for substantial damages for breach of contract. After a trial, the court addressed the legal effect of the non-fulfilment of a condition precedent, reaffirming the settled principle that non-fulfilment of a condition precedent results in the contract being discharged, either automatically or at the election of one of the parties, and that a contract does not take effect unless and until the condition precedent is fulfilled. It also considered the effect of the entire-agreement clause in the share sale agreement, holding, in line with authorities including Bank Perusahaan Kecil & Sederhana Malaysia Berhad v Iskandar Zulkarnain Zainal Abidin and Macronet Sdn Bhd v RHB Bank Sdn Bhd, that such a clause precludes the reception of any collateral promise or oral representation inconsistent with the written terms, so as to give effect to the expressed intention of the parties, and it declined to imply a term on the basis of business efficacy contrary to the agreement. On that basis the court allowed the plaintiff's claim for the refund of RM250,000 with interest at 5% per annum, dismissed the defendant's counterclaim to retain the deposit and for damages, and awarded the plaintiff costs of RM50,000. The judgment is a useful statement that a deposit is recoverable where the conditions precedent to a share sale are not fulfilled and an entire-agreement clause excludes collateral representations.