Shaik Daud Ismail JCA:

I have had the opportunity of reading in draft both the judgments of Siti Norma Yaakob JCA and Ahmad Fairuz bin Dato' Sheikh Abd Halim JCA and I concur with their conclusions that the appeal be allowed with costs, however, I associate myself with the comprehensive judgment of Siti Norma Yaakob JCA.

Siti Norma Yaakob JCA:

This appeal had been allowed with costs and I now give the reasons how that decision was arrived at.

In 1990, the respondent, a Japanese national and the plaintiff in the court below, came to this country to seek his fortune. He invested in the property market and for this purpose he entered into two sale and purchase agreements both dated 19 January 1990.

The first (the land sale agreement) was with the third appellant, a company owned and controlled by the first and second appellants who are husband and wife. As the registered proprietor of two adjoining pieces of land in Jalan Bukit Bintang, Kuala Lumpur, the third appellant who was also the third defendant in the court below, agreed to sell the properties together with a double-storey shophouse erected thereon, free from encumbrances and with vacant possession, to the respondent, for a consideration of RM4.9 million. As at the date of the agreement, the properties were charged to MUI Bank Berhad and that the respondent had every intention to replace the shophouse on the properties with a multi-storey office block.

The second agreement (the share sale agreement) was also executed by the respondent, this time with the first and second appellants, the directors and the registered shareholders of all the issued shares in the third appellant and the first and second defendants in the court below. Under the terms of the share sale agreement, the first and second appellants agreed to sell their entire shareholding, which is made up of two issued and paid up shares, in a company called Windollars Sdn. Bhd., to the respondent for a consideration of RM1.6 million. This is in fact a takeover of Windollars by the respondent.

Transactions relating to the share sale agreement have already been completed and it is not disputed that the first and second appellants have already received the purchase price of the shares in full and all documentation pertaining to the transfer of the shares and all books and relevant documents relating to Windollars have been executed and deposited with the respondent's solicitors.

What has become a bone of contention between the parties is the nonperformance of the land sale agreement. Under cl. 1, the respondent paid RM980,000 to the third appellant as deposit and earnest money. He had under cl. 2(i), three months from the date of the agreement ie, on or before 18 April 1990 (the completion date) within which to pay the balance of the purchase price of RM3,920,000 after which, vacant possession of the properties was to have been delivered by the third appellant. In fact a sum of RM141,024 was paid by the respondent towards the balance of the purchase price but he avers that such payment was mistakenly made.

On 12 March 1990 just about one month before the completion date, in proceedings emanating from Kuala Lumpur High Court CS. No. S6-22-102- 90, one Golden Scoop Sdn. Bhd., obtained an interim injunction restraining the third appellant from dealing with the properties in whatsoever manner on the ground that it had a three year tenancy agreement with the third appellant. The interim injunction was removed by the High Court but subsequently restored by the Supreme Court on appeal on 5 June 1990.

The presence of this injunction and the existence of a tenancy agreement forced the respondent to end his contractual relationship with the appellants and by his solicitors' letter dated 10 April 1990, he rescinded the land sale agreement on the ground of the third appellant's obvious breach for not being able to deliver vacant possession of the properties free from encumbrances. There was also an added reason