The obligation to refund the earnest deposit in a Letter of Intent is enforceable, provided no formal agreement is executed within the specified timeframe.

JUDGMENT

Leonard David Shim JC:

[1] The Plaintiff's claim against the Defendant is for the refund of the sum of RM1,000,000.00, being the amount paid by the Plaintiff to the Defendant pursuant to a Letter of Intent dated 24 August 2018 executed between the Plaintiff and the Defendant. The Plaintiff also claims interest on the said RM1,000,000.00 at the rate of 5% per annum from the date of the Writ until the date of full payment and costs on a full indemnity basis.

[2] At the Trial of this matter, the parties called one witness each:

(i) PW1 - Chua Eng Pu (Director of the Plaintiff).

(ii) DW1 - Lee Yeow Cheng (Director of the Defendant).

Background Facts

[3] The mainstay of the Plaintiff's claim is the Letter of Intent dated 24 August 2018 between the Plaintiff and the Defendant ("LOI").

[4] It is not in dispute that the LOI was executed by the parties' respective directors. This was stated by PW1 in his evidence-in-chief and admitted by DW1 in cross-examination.

[5] 2 portions of the LOI were highlighted to the Court. Firstly, the subject of the LOI which states:

"RE: LETTER OF INTENT TO JOINT VENTURE BETWEEN MEGACITY PROPERTY SDN BHD (OR ITS NOMINEES) AND ECO EVERGREEN SDN BHD FOR THE PROJECT "PARKAVENUE", SABAH"

[6] Secondly, the body of the LOI, inter alia states:

"PROPOSED PAYMENT TERMS

Payment Schedule

1) Upon Signing Letter of Intent (LOI). RM1,000,000.00 Land owner shall full refund of 1 Million and related fee If Joint venture agreement fail to sign within 3 months."

The Plaintiff referred to the above quoted portion of the LOI as the "Operative Clause".

[7] The Plaintiff's claim is for refund of the sum of the RM1,000,000.00 (the RM1m) as stipulated in the Operative Clause. The RM1m is described by the Defendant as "the earnest deposit". See p 15 of CBD.

[8] There are no agreed facts and agreed issues for trial filed by the parties. After perusing the pleadings and the Notes of Proceedings (NOP), it became clear that the main issues for trial are as follows:

(i) Whether there is a concluded agreement between the Plaintiff and the Defendant pursuant to the Letter of Intent dated 24 August 2018 signed by the Plaintiff and the Defendant.

(ii) Whether the sum of RM1,000,000.00 paid by the Plaintiff to the Defendant pursuant to the LOI is refundable by the Defendant to the Plaintiff.

Contentions Of The Parties

[9] The Plaintiff contends that as can be seen from the LOI, the Plaintiff and Defendant agreed, inter alia, to enter into a joint venture to develop lands bearing title numbers CL015701541 owned by the Defendant and CL015304319 owned by one Eco Park Villas Sdn Bhd.

[10] Under the terms of the LOI and the Operative Clause, the Plaintiff was to, inter alia first pay the Defendant the sum of RM1,000,000.00. This sum was paid as follows:

[11] It is not in dispute that no joint venture agreement was entered into between the Plaintiff (or its nominee) and the Defendant within 3 months from the date of the LOI or at all.

[12] The Plaintiff had via its nominee MegaCity Borneo Sdn Bhd been negotiating terms of the potential joint venture agreement. Draft agreements and correspondence between the parties' respective counsel had been produced. However, the parties were ultimately unable to come to an agreement as to the terms of the potential joint venture agreement.

[13] The Plaintiff had via Messrs Cheu, Adnan & Razi's letter dated 8 April 2019 inter alia demanded the total sum of RM1,350,000.00 - inclusive of the RM1,000,000.00 claimed by the Plaintiff - from the Defendant.

[14] For the avoidance of doubt, the Plaintiff has pleaded from the outset that the present action is in relation to the RM1,000,000.00 only and that the RM350,000.00 would be dealt with in a separate action. See para 10 of the Amended Statement of Claim (Encl 5). The sum of RM350,000.00 is being dealt with in Kuala Lumpur Sessions Court Suit No WA-B52NCvC-155-05/2020 and the plaintiff in that suit is PW1, namely Datuk Chua Eng Pu and the defendant is Eco Evergreen Sdn Bhd See p