MUDAJAYA CORPORATION BERHAD v CREST WORLDWIDE RESOURCES SDN BHD

Case Significance

Confirms that where a purchaser has satisfied the purchase price — here by an agreed set-off of a debt owed to it as contractor — it becomes the beneficial owner with a right in rem under Tan Ong Ban v Teoh Kim Heng, entitling it to specific performance and delivery of vacant possession of the properties.

This High Court decision at Kuala Lumpur concerns the enforceability of three sale and purchase agreements and was decided as a preliminary issue under Order 33 of the Rules of Court 2012. The plaintiff and the defendant, a developer now in liquidation, had a dual relationship: the plaintiff was the contractor of a mixed development comprising service apartments, offices and car parks awarded to it by the defendant. As the works progressed the developer encountered financial constraints in paying the contractor, and the parties arranged that a debt of some RM89,659,887 owing by the developer to the contractor would be satisfied by way of set-off against the purchase price of selected properties in the project, in favour of the contractor as purchaser or its nominees, under three sale and purchase agreements. Being satisfied that the dispute could be resolved on the documents and legal arguments, the Court directed the trial of a single issue under Order 33: whether the plaintiff was entitled to specific performance of the three agreements. The Court relied on the principle in Tan Ong Ban v Teoh Kim Heng that a purchaser who has fully settled the purchase price assumes the position of beneficial owner, with a right in rem over the property, equivalent to that of a legal owner even before registration. Here the purchase price under the three agreements had, in substance, been satisfied through the agreed set-off of the debt, so that the essence of the agreements had been performed. On that footing the Court concluded that the plaintiff was entitled to specific performance of the three sale and purchase agreements, requiring the delivery of vacant possession of the properties to the plaintiff. The decision illustrates the utility of Order 33 in resolving a discrete legal question on documentary facts without a full trial, and confirms that a set-off arrangement, under which a contractor's debt is satisfied against the price of properties it takes as purchaser, can place it in the position of a paid-up purchaser entitled to enforce the sale by specific performance.