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2010 MarsdenLR 249
COURT OF APPEAL PUTRAJAYA
ONG THEAN CHYE & ORS – Appellant
Versus
TIEW CHOY CHAI & ANOR – Respondent
[Civil Appeal No: P-02-1772-2009]
An unlicensed brokerage claim is unenforceable under the Valuers, Appraisers and Estate Agents Act and the Contracts Act, as it constitutes an illegal contract.
Headnote:(A) Valuers, Appraisers and Estate Agents Act 1981 - Sections 22C and 24; Contracts Act 1950 - Section 24 - Unlicensed brokerage practices; Respondents purportedly claiming professional fees for land brokerage under a sham agreement, which contravenes statutory provisions; Court held that the respondents' actions constituted an illegal contract and were unenforceable. (Paras 30, 31, 72)
(B) Privity of contract - The court emphasized that claims can only be made against parties to a contract; The respondents lacked privity with certain defendants who were not parties to the agreements. (Paras 13, 15)
Facts of the case:
The third appellant entered a sale agreement for land but also executed a separate document agreeing to pay certain fees to the respondents, who claimed these fees as commission despite not being licensed agents, leading to a legal dispute over the enforceability of the payment. (Paras 1-7)
Findings of Court:
The court found that the respondents operated without a license, rendering their payment claims under the agreements illegal and unenforceable under relevant statutes. (Paras 30, 31, 71)
Issues: The main issues included whether the payment claimed was lawful under the relevant Acts, and whether the respondents had privity of contract to sue the defendants. (Paras 75-78)
Ratio Decidendi: The court determined that a claim based on an illegal contract is unenforceable, emphasizing that parties must be licensed to practice in their field to claim fees for services rendered. (Paras 24, 31, 72-73)
Result: Appeal allowed with costs, High Court decision set aside, and deposit refunded to appellants.
Key Points: - The judgment holds that an unlicensed estate agency claim is illegal and unenforceable under the relevant acts. (!) (!) (!) - It discusses illegality under the Contracts Act 1950, including when contracts are void for illegality and related principles. (!) (!) (!) - It addresses privity of contract, clarifying that non-parties to a contract generally cannot sue on it. (!) (!) - It analyzes that the document in question is a sham and thus not enforceable. (!) (!) - It considers the consequences of lifting the veil of incorporation and why it was not applicable here due to pleadings. (!) (!) (!) - It notes the improper bifurcation of payment to vendors through a separate letter and its illegality as under-counter payments. (!) (!) (!) - It discusses the proper interpretation of contract terms and the objective meaning of language. (!) (!) - It states that contracts tainted with illegality will not be enforced, and the court may refuse relief where illegality is central. (!) (!) - It concludes with the appeal being allowed and the related deposits/refunds, confirming illegality and lack of enforceability. (!) (!)
What is the enforceability of a payment claim under a document involving unlicensed estate agents?
What is the effect of illegality on contracts under the Valuers, Appraisers and Estate Agents Act and the Contracts Act?
What is the doctrine of privity of contract as it applies to claims against non-parties to a contract?
| Table of Content |
|---|
| 1. execution of sale and purchase agreement. (Para 1 , 2 , 3) |
| 2. respondents seek payment balance under document. (Para 4 , 5 , 6 , 8) |
| 3. appellants argue lack of licensure. (Para 7 , 12 , 17) |
| 4. no privity between parties; no standing. (Para 13 , 14 , 15) |
| 5. payment as sham; illegal under contracts act. (Para 36 , 40 , 62 , 70 , 72) |
| 6. court declines to lift veil of incorporation. (Para 75 , 76 , 78) |
The Facts
[1] On 18 May 2004, the third appellant (TMI Ventures (M) Sdn Bhd) as the purchaser entered into a sale and purchase agreement (hereinafter referred to as "the said agreement") with several vendors (hereinafter referred to as "the vendors") to purchase parcels of land identified as Lot number 289, Lot number 290, Lot number 291 and Lot number 752. All these Lots were located at Mukim 11, Daerah Barat Daya, Penang (hereinafter referred to as "the said lands"). The said agreement can be seen at p 320 to 334 and at p 311 to 316 of the appeal record at Jilid 2(3). And at p 330 of the appeal record at Jilid 2(3), the purchase price was listed at RM3,883,645.
[2] On 12 May 2004, prior to the execution of the said agreement, the third appellant and the respondents (Tiew Choy Chai (first respondent) and Khor Teik Khoon (second respondent)) executed a document (hereinafter referred to as "the said document") wherein the third appellant agreed to pay the respondents a total sum of RM3,106,876 being the respondents' "professional fees and charges for negotiating and securing", on behalf of the third appellant, the said lands at the agreed price of RM3,883,645 subject to the terms and conditions stated therein. The said document can be seen at p 27 of the appeal record at Jilid 1 and it was worded as follows:
TMI VENTURES (M) SDN. BHD. (Co. No: 599269-M)
Unit 1-3-3, No 1 Jalan P Ramlee, 10460 Penang.
To:
Re: Purchase of all that 4 pieces of land known as Lot Nos: 289, 290, 291 & 752 Mukim 11, South West District, Penang held under GM390, 391, 392 & 436 respectively totalling 17,831 acres
We, the undersigned hereby confirm, agree and undertake to pay both of you a total sum of Ringgit Malaysia Three Million One Hundred and Six Thousand Eight Hundred and Seventy Six (RM3,106,876.00) only (hereinafter referred to as 'the said consideration') being your professional fees and charges for negotiating and securing on our behalf the lands abovementioned at the agreed sale price of Ringgit Malaysia Three Million Eight Hundred Eighty Three Thousand Six Hundred and Forty Five (RM3,883,645.00) only in the following manner subject to the following terms and conditions:
1. This agreement and undertaking to pay you the said consideration shall only be valid upon a formal and valid Sale and Purchase Agreement (hereinafter referred to as 'the said Sale and Purchase Agreement') being entered and executed between us and all the Owners of the said lands and the said lands could be transferred and registered into our names or our nominee(s). In the event that the sale or purchase is aborted, called off, terminated, rescinded or does not materialise or the Transfer could not be effected for any reasons whatsoever you shall not be entitled to the said consideration at all and you shall refund to us the said consideration or whatsoever sum or part thereof paid to you.
2. The said consideration will be paid out to you accordingly in the following manner:
(a) 10% upon the execution of the said Sale and Purchase Agreement between the Vendors (owners of the lands) and us;
(b) a further 10% within four (4) months from the date of the said Sale and Purchase Agreement; and
(c) the balance 80% within nine (9) months from the date of the said Sale and Purchase Agreement or three (3) months from the date of extraction of the Grant of Probate in respect of the Estate of Chan Fook Chin, Deceased whichever is the later with an automatic extension of three (3) months subject to us paying interest at the rate of 8% per annum on the balance remaining
