The validity of contracts is upheld when unchallenged evidence supports their existence, and the burden of proof shifts to the party making allegations against them.

Atan Mustaffa Yussof Ahmad J:

[1] When it comes to disputed business deals, the legal aftermath can be messy and extensive. Such was the situation with a contested restaurant sale that progressed from the Sessions Court into the appeal before this Court. In this appeal, the Court looks at whether the Appellants' allegations of sham contracts can stand absent their evidence at trial.

[2] The parties in this appeal shall be referred to as they were in the Sessions Court ie the Appellants will be referred to as "the Defendants" and the Respondent will be referred to as "the Plaintiff."

Background Facts

[3] The 1st Defendant, Chin Hui Min, a sole proprietor trading under the name and style of "GP Bar & Bistro entered into a Sale and Purchase Agreement dated 31 December 2019 ("the Sale and Purchase Agreement') with the Plaintiff, Gent Palace Bar & Bistro, a sole proprietorship, for the purchase of the Plaintiff's business and restaurant known as Gent Palace Bar & Bistro for RM1,200,000.

[4] Upon execution of the Sale and Purchase Agreement on 31 December 2019, the 1st Defendant paid RM700,000 to the Plaintiff. Through a Guarantee and Indemnity Agreement dated 31 December 2019 ("the Guarantee and Indemnity Agreement'), the 1st Defendant, Ang Bee Kiong and the 3rd Defendant, Shim Wai Keat agreed to guarantee and indemnify the Plaintiff for the balance purchase price of RM500,000 to be paid by the 1st Defendant before 29 February 2020.

[5] On 3 April 2020, the 1st Defendant paid RM100,000 of the balance purchase price to the Plaintiff. A balance sum of RM400,000 remained due and owing under the Sale and Purchase Agreement.

[6] The Plaintiff filed a civil suit against the Defendants in the Sessions Court seeking to recover the balance purchase price of RM400,000. The Sessions Court allowed the Plaintiff's claim with costs. The Defendants have now appealed against this decision.

The Plaintiff's Case

[7] Based on the Statement of Claim, the Plaintiff's pleaded case is summarised as follows:

a) The Plaintiff is a partnership business operating a bar and bistro which it sold to the 1st Defendant via the Sale and Purchase Agreement for RM1.2 million.

b) The 1st Defendant paid a deposit of RM700,000 and the balance purchase price of RM500,000 was to be paid by 29 February 2020.

c) To secure the balance payment, the 2nd and 3rd Defendants signed the Guarantee and Indemnity Agreement dated 31 December 2019.

d) The Plaintiff only received RM100,000 out of the RM500,000 balance purchase price owed.

e) Despite demands dated 6 September 2021 and 20 September 2021, the 1st Defendant failed to pay the outstanding balance of RM400,000.

[8] Hence, the Plaintiff claims from all Defendants jointly and severally:

a) Payment of the outstanding balance purchase price of RM400,000 owing under the Sale and Purchase Agreement between the Plaintiff and 1st Defendant.

b) Payment of the outstanding sum of RM400,000 from the 2nd and 3rd Defendants as guarantors under the Guarantee and Indemnity Agreement.

c) Interest at 5% per annum on RM400,000 from 29 February 2020 (date of breach) until judgment.

d) Post-judgment interest at 5% per annum from date of judgment until full settlement.

e) Costs of the action.

f) Any other relief deemed f