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2022 MarsdenLR 122
HIGH COURT MALAYA PENANG
DOA HUAT HOLDINGS SDN BHD – Appellant
Versus
MBL PLANTATIONS SDN BHD – Respondent
[Suit No: PA-22NCC-13-04/2022]
The termination of a share sale agreement is invalid if the terminating party fails to meet the contractual requirements for notice and opportunity to remedy alleged breaches.
Headnote:(A) Rules of 2012 – Order 14A and Order 33 r 2 – Share sale agreement – Defendant's counterclaim for specific performance granted; Plaintiff's claim dismissed due to non-fulfillment of conditions precedent outlined in the SPA and insufficient grounds for termination. (Paras 36, 44, 86)
(B) Construction of contract – Plaintiff failed to meet contractual prerequisites for terminating SPA, namely providing written notice and a cure period to Defendant. (Paras 37-39).
(C) Defenses in Contract Law – Defendant had fulfilled the condition precedent by obtaining state authority approval, thus validly proceeding with the share transfer. (Paras 66-74).
Facts of the case: The Plaintiff attempted to terminate a share sale agreement alleging breaches that were deemed immaterial, while the Defendant maintained compliance with all obligations, including payment of the necessary Consent Fee for approval. The relevant approval from the state authority was obtained by the Defendant, contrary to Plaintiff's assertions (Paras 19, 26, 58).
Findings of Court: The Court found that the Defendant had fulfilled its obligations under the contract, while the Plaintiff's allegations regarding termination were unarguable. The contractual obligations included a requirement for notice which the Plaintiff neglected. The claim for a refund was accordingly dismissed (Paras 55-56).
Issues: Main issues included the validity of the Plaintiff’s termination notice, compliance with the Condition Precedent, and entitlement to a refund of previous payments made. (Paras 26, 56)
Ratio Decidendi: The Court underscored the strict adherence to contract terms and the necessity for the Plaintiff to provide notice prior to termination, confirming that the Plaintiff's failure to do so rendered the termination invalid (Paras 37, 44).
Result: Plaintiff's claims dismissed; Specific performance ordered for Defendant against Plaintiff. (Paras 86)
JUDGMENT
Introduction
[1] The Defendant ("D") filed an application vide Enclosure 19 ("Encl 19") for the determination of certain questions of law or construction of document. And for a consequential order to dismiss the Plaintiff's ("P") claim. Enclosure 19 is made under O 14A or O 33 r 2 and rule 5 of the Rules of 2012.
[2] D also filed an application vide Enclosure 21 ("Encl 21") for summary judgment of its counterclaim against P. Enclosure 21 is made under O 14 of the Rules of 2012.
[3] Both Encl 19 and Encl 21 were heard together. I allowed Encl 19 and dismissed P's claim. I also allowed Encl 21 and entered summary judgment against P. Here are the grounds of my decision.
Background Facts
[4] D is a wholly-owned subsidiary of Muar Ban Lee Group Bhd ("Holdco"). Holdco is a public listed company, which is listed on Bursa Malaysia Securities Bhd ("Bursa Malaysia").
[5] P and D executed a share sale agreement dated 1 April 2021 ("SPA"). Under the SPA, D (as vendor) agreed to sell its entire shareholding of 2 million shares in Sokor Gemilang Ladang Sdn Bhd ("Company") to P (as purchaser) for a purchase consideration of RM25 million ("Purchase Consideration").
[6] The salient terms of the SPA are these:
(a) Clause 1.1 - Definitions
"Conditional Period" means by 5 July 2021 with a further automatic extension period of 24 months from 5 July 2021 or such other extended period as may be agreed by the Vendor and the Purchaser."
(b) Clause 2.3 - Conditions Precedent
"The sale and purchase of the Sale Shares is conditional upon the following conditions precedent being fulfilled on terms and conditions acceptable to the Purchaser or waived by the Purchaser on or before the expiry of the Conditional Period:
(a) the approval of the state authority pursuant to the Concession."
(c) Clause 2.4 - Non-fulfillment of conditions precedent
"In the event the conditions precedent in cl 2.3 are not fulfilled or waived by the expiry of the Conditional Period, this Agreement shall terminate and cease to have any force and effect and neither party shall have any claims against the other party save for any antecedent breaches. Upon termination of this Agreement according to this clause, the Purchaser shall immediately return the Relevant Documents to the Vendor and the Vendor shall immediately refund the Deposit to the Purchaser."
(d) Clause 3.2 - Payment of Purchase Consideration
"The Purchase Consideration shall be satisfied entirely in cash in the following manner:
(a) upon execution of this Agreement, the Purchaser shall to the Vendor the sum of RM15,000,000.00 as deposit for purchase of the Sale Shares ("Deposit");
(b) the balance Purchase Consideration of RM10,000,000.00 shall be paid by the Purchaser to the Vendor's nominated solicitors upon execution of this Agreement and to be dealt with in the following manner:
(i) to release to the Vendor on the Completion Date;
(ii) in the event the approval of the approval of the state authority pursuant to the Concession is not obtained by 5 July 2021, the RM10,000,000.00 will be released to the Vendor as interest-free fixed term loan for 24 months from 6 July 2021 and thereafter will be repaid by the Vendor to the Purchaser in 12 equal monthly instalments. Such loan shall be converted back into the balance Purchase Consideration once the approval from the State Authority pursuant to the Concession is obtained where the parties shall proceed to Completion."
(e) Clause 7.1 - The Vendor's breach
"In the event the Vendor breaches any of the material or fundamental term or condition of this Agreement (including the Warranties) or if it fails to perform or observe any material or fundamental undertaking, obligation or agreement expressed or implied in this Agreement, the Purchaser shall have the right to give notice in writing to the Vendor specifying the default or breach and gives the Vendor 14 business days to remedy such breach and if the Vendor fails to remedy the breach, the Purchaser shall have the rights to t
