The privity of contract doctrine asserts that a party cannot be bound to obligations arising from agreements to which it was not a party.

Introduction

[1] The primary issue that arose for consideration in this appeal was whether a debt due and owing by the main contractor of a mixed development project, one HAC Builders Sdn Bhd, the second defendant in the court below ('HAC Builders') to its sub-contractors, Qudotech Sdn Bhd, the 3rd plaintiff in the court below ('Qudotech') and Fei Wong Letrik Sdn Bhd, the 2nd plaintiff in the court below ('Fei Wong Letrik') was effectively set-off or settled by virtue of a 'contra-arrangement' whereby HAC Builders agreed to give Qudotech four units in the mixed development in return for the extinguishment or settlement of the debt.

[2] Pursuant to this 'contra-arrangement' a unit, namely Unit A-3-1B was allegedly 'given' to Qudotech in settlement of the sum of RM97,845.29. Qudotech in turn nominated Ching Miew Yoke, the 1st plaintiff in the court below ('the purchaser') as the beneficiary of Unit A-3-1B.

[3] Notwithstanding this 'contra-arrangement', the purchaser was required to execute a sale and purchase agreement for the said unit with Green Crescent Resources Sdn Bhd, the first defendant in the court below and the vendor under the sale and purchase agreement ('Green Crescent'). In view of the 'contra-arrangement' in so far as the purchaser and the other plaintiffs were concerned, the purchase price for the said unit was deemed settled, thereby entitling the purchaser to legal and beneficial ownership of the said unit.

[4] This arrangement was not made in writing nor was it expressly stipulated in the sale and purchase agreement between the purchaser and Green Crescent, the vendor. No instalment payments were therefore made by or on behalf of the purchaser to the vendor, Green Crescent Resources.

[5] Subsequently Green Crescent Resources, the vendor, terminated the sale and purchase agreement for Unit A-3-1B on the ground that the purchaser had failed to pay the balance purchase price. In short the 'contra arrangement' between HAC Builders and Qudotech and Fei Wong Letrik was not given cognizance by Green Crescent Resources.

[6] In this context it is pertinent to bear in mind that the plaintiffs in the court below maintain that Green Crescent Resources was effectively 'bound' by the contra-arrangement between HAC Builders, Qudotech and Fei Wong Letrik. The reason for such an assumption was because a common director of Green Crescent and HAC Builders, namely one Yap Ah Bee, was the person who had negotiated this 'contra-arrangement' or 'contra-settlement' with Qudotech and Fei Wong Letrik Sdn Bhd Therefore the plaintiffs' contention was that the corporate veils of Green Crescent and HAC Builders ought to be lifted whereupon it would be noted that these companies worked effectively as a single entity. The appellant, Green Crescent Resources disputes this.

[7] As Unit A-3-1B was not transferred to the purchaser, the plaintiffs in the court below initiated this action against Green Crescent Resources and HAC Builders Sdn Bhd seeking declarations inter alia, that:-

(a) The purchaser is the legal and beneficial owner of the said unit;

(b) The termination of the sale and purchase agreement between the purchaser and Green Crescent Resources is bad in law; and alternatively,

(c) Damages.

[8] It is therefore apparent that the primary issue that fell for consideration was whether the 'contra-arrangement' or 'contra-settlement' amounted to a legally binding and enforceable agreement whereby Green Crescent Resources as vendor of the subject unit was bound to give legal and beneficial ownership of the said unit to the purchaser.

[9] Put another way, the issue for consideration by the court was whether the 'agreement' between HAC Builders Sdn Bhd and Qudotech and Fei Wong Letrik Sdn Bhd for