Abdul Malik Ishak J:

Introduction

This is an appeal by the defendant in encl. 13 against the learned senior assistant registrar's ("SAR") decision in favour of the plaintiffs' summary application pursuant to O. 14 of the Rules of the High Court 1980 ("RHC").

Factually speaking, the appeal centred on three agreements entered into between the plaintiffs and the defendant. These agreements are not the standard sale and purchase agreements under the Housing Developers (Control and Licensing) Regulations 1989 made under the Housing Developers (Control and Licensing) Act 1966. In fact, these three agreements are "set-off" agreements entered into for purposes of setting-off all the debts due from Europlus Corporation Sdn Bhd to WCT Engineering Bhd. The defendant is an associated or a subsidiary to Europlus Corporation Sdn Bhd while the plaintiffs are the directors of WCT Engineering Bhd. These three agreements are drafted by the plaintiffs' solicitors and they are, incidentally, the solicitors representing the plaintiffs in this action.

It was a term in these agreements that the defendant shall within six (6) months from 23 January 1998 (the date of the sale and purchase agreements) redeem the said parcels (which will be referred to shortly) and deliver to the plaintiffs a letter of disclaimer failing which the defendant shall pay to the plaintiffs as purchasers 12% interest on daily rests on the purchase price from the expiry of the six (6) months to the date of actual redemption (hereinafter referred to as the "LAD").

The plaintiffs purchased parcel no: F 10 at RM371,200 with LAD at RM146,323.98, parcel no: F 41 at RM328,900 with LAD at RM129,649.67 and parcel no: F 42 at RM328,900 with LAD at RM129,649.67. The total LAD came up to RM405,623.32. It was quite substantial.

It is undisputed that the letter of disclaimer was dated 5 November 2001 and calculation-wise the delay was from 22 July 1998 to 5 November 2001 which came up to 1199 days for the three units.

Arguments Advanced By The Defendant

It may be summarised in the following manner:

(a) that the plaintiffs are enforcing a penalty clause which is invalid in the Malaysian context and in Malaysia generally by virtue of and pursuant to s. 75 of the Contracts Act 1950; and

(b) that the plaintiffs are claiming compounding interest by imposing 8% upon 12% which is said to be contrary to s. 11 of the Civil Law Act 1956.

In fact, these are the two salient issues for the court to deliberate upon. The determination of these two issues would dispose off the defendant's appeal in encl. 13, once and for all.

I shall now proceed to examine these two issues summarily.

The First Issue

The clause which is said to be a penalty clause is found in the sale and purchase agreement between the defendant and the plaintiffs dated 23 January 1998 as seen in exh. "YYC1" to the first plaintiff's affidavit affirmed on 2 June 2004 as reflected in encl. 5 (hereinafter referred to as the "said clause") and I must be forgiven for reproducing the said clause:

2. Redemption of the said Parcel

(1) The vendor (referring to the defendant) shall within six (6) months from the date hereof redeem the said parcel from the bridging financier and deliver to the purchaser(s) (referring to the plaintiffs) a letter of disclaimer (hereinafter called the "letter of disclaimer") from the bridging financier disclaiming all rights title and interest to the said parcel and undertaking to exclude the same from any foreclosure proceedings, if any action of such a nature is instituted against the vendor (referring to the defendant) on the said lands.

(2) If upon the expiry of the said six (6) months the vendor (referring to the defendant) shall fail to redeem the said parcel from the bridging financier rendering the said parcel free from all encumbrances the vendor (referring to the defendant) shall pay to the purchaser(s) (referring to the plaintiffs) interests at twelve per centum (12%) per annum on daily rests on the