The court affirmed the enforceability of a Letter of Undertaking, emphasizing that strict interpretations leading to unjust outcomes should yield to reasonable interpretations aligned with commercial common sense.

Azimah Omar JCA::

A. Brief Facts

[1] The Appeal before us is a claim for specific performance of a Letter of Undertaking as a collateral agreement to a larger Joint Venture Agreement upon the completion of the development under the contracts.

[2] The 1st Respondent, CC Land Resources Sdn Bhd ("CCL") was the landowner of some 2.5 acres of project land under a Joint Venture Development Agreement dated 6 April 2016 ("JVA") entered into with the Appellant Developer, Geo Win Sdn Bhd ("GW").

[3] Under the JVA, upon completion of the development of shophouses on the project land, CCL will be entitled to 20% Development Profit from the sale of the shophouses by GW. Upon a variation agreement, this 20% entitlement was later substituted to cash payments. Thus, the net effect of the JVA (with variation) was that CCL relinquishes (while GW accepts) proprietary ownership or interest over the project land (with shophouses) while CCL shall be paid consideration in the form of cash payments. This transfer of proprietary rights over the shophouses was further evinced by the execution of a Power of Attorney by CCL to allow GW to deal with the shophouses.

[4] Additional or collateral to the JVA, a collateral Letter of Undertaking ("LOU") was also executed by both CCL and GW. Under the LOU, as part of the deal under the JVA, GW as developer undertook and promised to give 1 complimentary unit of double-storey semi-D shophouse ("complimentary unit") to CCL's nominee (Sha Chaim Chuan), 2nd Respondent as additional consideration to the JVA. The general condition to the LOU was that the development must consist of either:

a. (If frontage of all units does not exceed 38 feet) 16 units of shophouses which were approved for development by the authorities; or

b. (If frontage of some units does exceed 38 feet) any approved number of shophouses approved by the authorities.

[5] The LOU was negotiated, prepared, and executed between each parties' respective solicitors (at that time). To further solidify the terms of the LOU, the 1st Respondent's Board of Directors issued a resolution circa October 2019 to authorize or ratify the execution of the LOU.

[6] In furtherance to the JVA and LOU, there were two planning permissions approved by Jabatan Perancangan Pembangunan Majlis Perbandaran Bentong. The 1st approved plan on 6 October 2017 comprised 16 units of semi-detached shophouses. There was a variation leading up to the 2nd approved plan on 8 October 2019 which thereafter the project comprises of 12 semi-detached shophouses and 2 bungalows.

[7] In line with the agreed LOU, there was a clear whatsapp communication between CCL's nominee (2nd Respondent) and the Appellant's Director (DW3) circa 2019 where the Appellant has explicitly acknowledged and admitted the 2nd Respondent's selection of the complimentary unit based off of the approved plans.

[8] The construction of the 14 shophouses under the 2nd approved plan proceeded and was completed without any event. At the completion of the construction, 11units had more than 38 feet of frontage width. Only 3 units had very minute and negligible margin between 10cm and 30cm (or 0.3 to 1.01 feet) less than 38 feet of frontage width.

[9] All the parties (especially the Appellant) was well aware of the binding force of the LOU and had never at any time protested or complained of any illegality against the LOU. Despite the 3 units' minute and negligible margin of difference, the Appellant had never raised any objections against the LOU during the entire period of development from the instance of the 2nd approved plan until completion of development.

[10] Considering the completion of the development (and the Appellant's acquiescence to the minute and negligible margin), the 1st Respondent circa March 2020 wrote to the Appellant requesting for compliance of the LOU and transfer of the complimentary unit to the 2nd Respondent as promised and agreed by the Appellant.

[11] In breach of the LOU, the Appellant for the 1st time ever