Additional deposits paid for time extensions in property sales are subject to forfeiture as per Section 75 of the Contracts Act 1950 if deemed reasonable.

[1] On 23 August 2016, this court granted leave to appeal on the following questions:

(i) Where, in a sale and purchase of property, where terms and conditions of the sale and purchase agreement (SPA) have been agreed and a date is fixed for the execution of the SPA, whether any additional deposit paid for the extension of time for completion is equally subject to forfeiture; and

(ii) Whether a purchaser who has agreed and willingly paid an interest in consideration of an extension of time be entitled to claim a refund of the same in the event he defaults in executing the SPA and paying the balance deposit on the due date.

[2] In this judgment unless otherwise stated the parties are referred to as they were at the first instance court, namely the appellant as the defendant and the respondent as the plaintiff. The defendant was the 1st defendant while OCBC Bank (Malaysia) Berhad was the 2nd defendant at the commencement of the trial. The claim against the 2nd defendant was discontinued just before the commencement of the trial at the first instance. The defendant was wound up on 25 July 2011 and liquidators were appointed to manage its affairs. As such, reference to acts of the defendant after being wound up were that of the liquidators.

[3] As then President of the court of Appeal who presided over this appeal has since retired we are delivering this judgment in reliance upon s 78 of the Courts of Judicature Act 1964. This is a unanimous decision by the remaining members of the panel who heard this appeal.

[4] The defendant was the owner of a piece of land in Mukim Bukit Katil, Melaka ("the land") together with the plant and machinery ("the machineries") on the land. The land and the machineries are herein collectively referred to as "the properties". Following the winding up of the defendant, the properties were put up for sale by way of an open tender exercise.

[5] However, before the exercise could be carried out, the plaintiff made an offer to purchase the properties for RM90 million being RM80 million for the land and RM10 million for the machineries. The plaintiff did so vide a letter dated 6 October 2011 with a Tender Form duly completed in compliance with the requirements contained in the Information Memorandum issued by the defendant.

[6] According to cl 2.5.1 of the Information Memorandum:

(a) all offers for the Property must be accompanied by a sum equivalent to 2% of the Offer Price (hereinafter referred to as "ED"). The Offer Price shall be in Ringgit Malaysia ("RM").

(b) all offers for the Machinery must be accompanied by a sum equivalent to 10% of the Offer Price (hereinafter referred to as "ED"). The Offer Price shall be in Ringgit Malaysia ("RM").

[7] It should be noted that the Tender Form was varied from the original version when submitted so as to reflect the fact that the plaintiff was offering an earnest deposit amount of RM1 million instead of 2% of the tender price for the land (RM1.6 million) and 10% of the tender price of the machineries (RM1 million). However, the accompanying letter dated 6 October 2011 was clear when it stated that the offer was submitted together with "Earnest Deposit Ringgit Malaysia One Million (RM1,000,000.00) as part of the Earnest Deposit".

[8] On 3 October 2011, the plaintiff paid the sum of RM1 million as the earnest deposit ("the first earnest deposit"). The liquidators accepted the plaintiff's offer and did not proceed with the tender exercise.

[9] The acceptance of the plaintiff's offer was subject to the terms