AuthorDavid FUNG Yin Kee SJD (Syd); Advocate and Solicitor (Sabah, Malaysia); Partner, Messrs Alex Pang & Co.
Citation(2020) 32 SAcLJ 611
Date01 December 2020
Published date01 December 2020

What's in a Name?1

The Federal Court's decision in Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd [2010] 1 MLJ 597; [2010] 1 CLJ 269 has not added clarity to the law or certainty to the outcome in a common dispute over a common transaction. It is necessary to revisit the decision. The discharge of a contract for breach or repudiation following termination and the ensuing damages claim are determined by their own set of principles. The legal response of restitution to an unjust enrichment after the discharge of contract also has its own principles. Names of these incidents may differ, but it is understood what principles they attract. Conflation of established principles is to be avoided. Since there is already a body of doctrines applicable in these areas of the common law, this article is a call to return to their orthodox application.

What's in a name? That which we call a rose, By any other name would smell as sweet.[2]

I. Introduction

1 This article to revisit the Federal Court's decision in Berjaya Times Square Sdn Bhd v M-Concept Sdn Bhd3 (“Berjaya Times Square”) after almost a decade is felt necessary because its controversial parts on breach of contract and remedies are having a negative effect on the way this area of law is understood. Being a Federal Court decision on a common area of dispute and traversing an area of law requiring the application of general principles, it would have much influence on the court itself and is of course binding on the courts below, which means that its true reach should be fully understood.

2 It is hoped that this article will provide clarity and a way to deal with the various doctrinal issues that were in fairness not created solely by the decision but were certainly stirred up in its wake. There are five parts to this article. Part II identifies the dispute and the issues involved and furnishes the present understanding of the decision, including the views of its fiercest critic.4 Part IV, by far the longest one, submits what the decision actually decides and its limits by using five chosen criteria: (a) different bases for discharge of contract; (b) breach of contract (and fundamental breach); (c) repudiation; (d) election of rights and remedies; and (e) unjust enrichment.5 Part V concludes by heralding the virtues of the consistent use of the most commonly understood names and the pathway that such usage produces.6

II. The dispute, issues and present understanding of the decision
A. The dispute in a common fact situation

3 The dispute arose from a sale transaction in a scenario common to many who have bought a landed property off-plan. The appellant/ defendant was a developer of a mixed development in Kuala Lumpur known as Berjaya Times Square Sdn Bhd. Commercial units of shop-lots were opened to the public to purchase and own. By a sale and purchase agreement dated 24 August 1995, the appellant agreed to sell the shop-lot duly completed and with vacant possession to the purchaser, the respondent/plaintiff, at the price of RM1,149,771 within 36 months. This was expressly provided in cl 22. The same clause also provided an automatic extension period of three months, failing which liquidated agreed damages were payable for the period of delay until vacant possession of the property was delivered. Under cl 32, time was of the essence for the contract. The last day for vacant possession of the property was 23 November 1998. The appellant did not deliver within time but could only do so four years and four months later.

4 Despite the appellant's failure to deliver the property, the respondent continued to pay the instalments towards the purchase price through a loan with a financial institution as and when they were due. There were meetings and correspondence between representatives of the parties in which assurances were given that delivery would be by end of 2001. On 27 December 2001, the respondent's solicitors wrote to terminate the sale agreement and asked for a refund of the instalments paid. The

appellant quickly denied that the respondent was entitled to terminate the agreement but only to payment of liquidated agreed damages for the period of delay. Another assurance was given on 1 October 2002 that it would be done by year-end 2002. None of the assurances were kept. The appellant was only able to deliver vacant possession on 1 July 2003. By the time the respondent commenced action against the appellant, the purchase price had been fully paid.

5 In the action, the respondent claimed for a declaration that the agreement was validly terminated by the appellant's breach of contract on 27 December 2001, refund of the purchase price, and damages sustained for loan costs. The appellant did not dispute it had breached the agreement in its failure to complete and deliver the property within time but contended that this breach did not give rise to the respondent's right to terminate and it would only be liable to pay the liquidated agreed damages for the period of delay.

B. The courts' decisions in the case

6 The High Court7 found in favour of the respondent and awarded all its different heads of claim. Mohd Hishamudin Mohd Yunus J (as he then was) found the failure of the appellant to deliver the property after an unreasonably long period of delay, over four years, was a fundamental breach of the contract and this entitled the respondent to terminate the agreement. The appellant had breached its obligation to deliver vacant possession of the property within the stipulated period when time was of the essence. The breach of this obligation to perform within time where time was of the essence under the agreement entitled the respondent to terminate the contract under s 56(1) of the Contracts Act 1950.8 There was also the appellant's argument that the respondent was estopped from terminating the agreement because of the respondent's conduct in continuing to pay the instalments as they became payable and in allowing more time. The court rejected this argument since the appellant was in breach and had come to equity with unclean hands. However, without further deliberation on the remedies claimed, the court awarded all the respondent's remedies.9

7 On the appellant's appeal, the Court of Appeal10 unanimously confirmed the High Court decision. Zaleha Zahari JCA (as she then was) and Raus Sharif JCA (as he then was) gave one judgment affirming the

High Court decision for the same reasons.11 They referred in particular to the High Court decisions in Tan Yang Long v Newacres Sdn Bhd12 and Law Ngei Ung v Tamansuri Sdn Bhd13 in support of their decision.14 They also noted that another two High Court decisions in Chye Fook v Teh Teng Seng Realty Sdn Bhd15 (“Chye Fook”) and Kang Yoon Mook Xavier v Insun Development Sdn Bhd16 (“Xavier Kang”) decided similarly.17 In a separate judgment, Abdul Malik Ishak JCA also referred to Chye Fook and Xavier Kang to support the respondent's right to terminate the agreement, and emphasised that since time was expressed to be of the essence, the respondent could terminate as provided under s 56(1) of the Contracts Act 1950 and also claim liquidated agreed damages for the delay.18

8 The Federal Court disagreed with both the High Court and the Court of Appeal, and reversed and set aside their respective orders. The Federal Court dismissed the respondent's action. Gopal Sri Ram FCJ gave the main judgment, with whom Zulkefli Ahmad Makinudin FCJ (as he then was), who also gave a short judgment in support, and Mohd Ghazali Yusoff FCJ agreed.

9 At this stage of the article, only the bare decision of the Federal Court, without any comment, will be stated. Their Lordships, as justified by the facts of the case, applied s 40 of the Contracts Act 1950 read together with s 56(1) in determining whether the respondent had the “common law right to rescind” and they decided that it did not. In doing so, they read the words “fails to do any such thing” in s 56(1) with “any such thing” as referring to the “promise in its entirety” stated in s 40. Since they had already interpreted “the promise in its entirety” to mean that the promisor's performance must have been a total failure of consideration, a concept used in the law of restitution, they were able to reason that there was no total failure of consideration on the facts to entitle the promisee, the respondent, to “rescind” the contract under the common law.19 This is the most controversial part of the decision and is discussed in greater detail below.20 The Federal Court also found, as a matter of construction, that time was not of the essence of the agreement and the respondent

had wrongfully terminated the agreement under s 56(1) of the Contracts Act 1950. Although time was expressed under cl 32 to be of the essence, the appellant's obligation to complete and deliver the property within the stipulated time was not of the essence since its obligation to pay liquidated agreed damages under cl 22 showed that the contract parties did not intend it to be of essence. Consequently, the respondent's action was dismissed.
C. Professor Sinnadurai's critique

10 Writing shortly after the Federal Court's decision in Berjaya Times Square, Prof Visu Sinnadurai gave it extensive treatment.21 In dealing with the case, he helpfully surveyed the many decisions on this issue of “whether a purchaser may rescind a sale and purchase agreement and recover the purchase price in the event of late delivery of the property by the vendor”, which he described as commonplace.22 He lamented that although the Federal Court had acknowledged that for the past 150 years there had been much discussion on this question and the cases decided during this period have settled the principles, the court had then proceeded to restate these settled principles and in so doing the judgment as applied in subsequent cases indicated “the difficulties in following the exact principles of law enunciated by the Federal Court”.23...

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