Lord Hailsham LC (delivering the judgment of the Board):

This is an appeal from a decision of the Federal Court of Malaysia (Ong CJ, Suffian and Ali FJJ) allowing on 26 July 1969 an appeal by the plaintiff from the judgment of Gill J (as he then was) given in the High Court in Malaya at Kuala Lumpur on 25 November 1966.

The question in the proceedings was whether a vendor was entitled to forfeit a deposit paid on a contract for the sale of real property following its noncompletion by the purchaser though the vendor was not in a position to prove actual damage flowing from the purchaser's breach of contract. The appeal raises three points:

(1)Whether on the true construction of the contract the vendor was entitled to forfeit the whole deposit notwithstanding his inability to prove that he had suffered damage by reason of the purchaser's failure to complete.

(2)Whether in the circumstances s. 75 of the Contracts (Malay States) Ordinance of 1950, which is in the same terms as the s. 74 of the Indian Contract Act as amended, applied to the forfeiture in question so as to entitle the purchaser to recover his deposit notwithstanding his failure to complete.

(3)Whether s. 65 of the Contracts Ordinance which is in same terms as s. 64 of the Indian Contract Act applies to the forfeiture in question so as to oblige the vendor to return the deposit on termination of the contract as a benefit received under the contract.

Under a contract of sale date 25 May 1962 the present appellants, who were defendants in the proceedings, were the vendors of an estate of 1,488 acres of land at a price of $3,775.000. The completion date was 90 days from date of the contract and thus expired on or before 24 August 1962. The contract provided for the payment of a 10 deposit, that is $377,500, receipt of which was acknowledged in the contract. There was a provision for forfeiture in the event of the purchaser failing to complete. The construction of this provision is one of the main questions for decision in the appeal. The relevant clause of the contract were cll 1 and 5. These clause provided:

Clause I "Subject always to cl 2 hereof the vendor shall sell and the purchaser shall purchase the said lands excluding the areas sold upon and subject to the terms and conditions and to the rights hereinafter set forth free from encumbrances and with vacant possession at the price of dollars three million seven hundred and seventy five thousand ($3,775.000) whereof the vendor's agents Guthrie Agency (Malaya) Limited of four Mountbatten Road, Kuala Lumpur have prior to the execution of these presents received the sum of dollars three hundred and seventy seven thousand five hundred ($377.500) by way of deposit and part payment ." (Their Lordships' italics.) Clause 5 "If due to any act or default of the purchaser the said purchase shall not be completed as herein provided the vendor shall be entitled by notice in writing to the purchaser to declare this agreement at an end and thereupon this agreement shall cease to be of any force or effect and the sum of $377,500 (dollars three hundred and seventy seven thousand five hundred) referred to in cl 1 hereof shall be forfeited to the vendor to account of damages for breach of contract". (Their Lordship' italics again.)

The original purchaser under the contract assigned his rights and obligations to one SK Jagatheesan who has subsequently died and the present respondent is the executrix of SK Jagatheesan's estate. The original plaintiff in the proceedings was SK Jagatheesan, but after his death the respondent carried on the proceedings on behalf of the creditors of the estate. The respondent was not represented before their Lordships on the hearing of the appeal.

In the events which happened, the completion did not take place in due time and by notice dated 27 August 1962, after the date for completion had expired, the vendors gave notice that the contract was at an end and purported to forfeit the deposi