1. ) LIM KHAI GUAN 2. ) LOH SIOW PENG v CHERISH WORDS SDN BHD

Case Significance

Illustrates the treatment of reciprocal promises under sections 52 and 53 of the Contracts Act 1950 and the failure of a 'prevention' defence where the defendant shows no readiness or willingness to perform, supporting consequential remedies on a validly terminated share sale agreement.

This High Court decision in the Commercial Division at Kuala Lumpur concerns consequential remedies following the termination of a share sale agreement for breach. The two plaintiffs had sold 5,000 shares in a plantation company to the defendant company under a share sale agreement dated 7 February 2023, varied by a supplemental agreement, for a total consideration of RM4,900,000. The supplemental agreement varied the final instalment so that a tranche of RM2,700,000 was to be satisfied by the defendant transferring shares it held in a listed company to the plaintiffs. After earlier, convoluted litigation was withdrawn with liberty to refile, the plaintiffs brought this originating summons to compel the defendant to transfer the plantation shares back to them, reversing the sale, on the ground that the defendant had breached a material term by failing to pay the final tranche.

It was asserted, without challenge, that the defendant had failed to transfer the shares representing the RM2,700,000 tranche. The plaintiffs issued a notice of breach and, the breach not being cured, terminated the agreement and demanded the consequential remedies it provided. The defendant's only defence was that the plaintiffs had disabled it from performing its reciprocal promise by not providing a Central Depository System (CDS) account needed to deal in the listed shares.

Applying sections 52 and 53 of the Contracts Act 1950 on reciprocal promises, the court held that providing the CDS account was not a substantive obligation that prevented performance, and that there was no objective proof of the defendant's own readiness and willingness to transfer the shares — the defendant had said nothing during the entire cure period and responded only after it had lapsed and the agreement had been terminated. Finding the breach established and unexcused, the court allowed the originating summons with costs of RM8,000.00. The judgment illustrates the treatment of reciprocal promises and a "prevention" defence on a terminated share sale agreement.