The doctrine of frustration cannot apply where the inability to perform is self-induced, and parties must fulfill contractual obligations unless explicitly stated otherwise.

Mohamed Zaini Mazlan JCA:

Introduction

[1] The appellant's claim against the respondents stems from the forfeiture of a deposit of RM1,000,000.00 made under a share sale agreement. The respondents forfeited this deposit because the appellant failed to pay the remaining purchase price by the specified deadline. The appellant contended that the agreement had been frustrated and that the conditions precedent outlined in the agreement could not be fulfilled.

[2] The High Court dismissed the appellant's claim for a refund of the RM1,000,000.00 deposit with costs after a full trial, favouring the respondents; hence, this appeal.

Facts

The Parties

[3] The appellant is a subsidiary of Yayasan Pembangunan Ekonomi Islam Malaysia ('YaPEIM'). The respondents held shares in seven companies ('the companies'), which are as follows:

[4] The companies operate a chain of convenience stores known as "Pasaraya Aneka" in various locations in the north and east of the country. They have been in business for over eighteen years. YaPEIM was interested in taking over the companies and appointed the appellant as the project executor.

The Share Sale Agreement

[5] The negotiations between the appellant and the respondents resulted in the execution of a Share Sales Agreement dated 26 February 2018 ('the Agreement') between them. Under the Agreement, the respondents agreed to sell their shares in the companies to the appellant for a total consideration of RM10,000,000.00. As stipulated in the Agreement, the appellant paid an initial deposit of RM1,000,000.00, which was credited towards the total purchase price. YaPEIM had paid the deposit on the appellant's behalf. This deposit was subsequently apportioned among the respondents as follows:

[6] The remaining balance of the purchase price, amounting to RM9,000,000.00, was to be paid by YaPEIM on behalf of the appellant within fourteen days of fulfilling the conditions precedent outlined in cl 2.1 of the Agreement. These conditions precedent were to be satisfied within six weeks from the date of the Agreement or within an extended period mutually agreed upon by the parties. Clause 2.1 is as follows:

Conditions Precedent: This Agreement shall be conditional upon the following being obtained, procured and/or fulfilled within six (6) weeks from the date of this Agreement or such extended time as the parties herein may mutually agree ("The Conditional Period"):

(a) the Purchaser/Purchaser's Solicitor give a written confirmation to the Vendor's Solicitor confirming that the Purchaser is (sic) satisfied with the outcome of a due diligence audit on the legal, financial, technical and business aspects of the Company (hereinafter referred to as "Due Diligence Audit") by the Purchaser at its own costs and that the management, directors and/or shareholders of the Company successfully remedied and/or rectified specific issues/concerns uncovered from the Due Dilligence Audit;

(b) the approval of the board of directors of the Company for the transfer of the Sale Shares;

(c) the approval of the board members of the Purchaser for the purchase of the Sale Shares; and

(d) such other consents or approvals as may be required (or deemed necessary by the parties hereto) from any third party or Governments, regulatory body or competent authority having jurisdiction over the acquisition of the Sale Shares or the transactions contemplated under this Agreement.

[7] On 20 April 2018, the appellant's solicitors sent a letter to the respondents' solicitors stating that:

(a) the appellant is satisfied with the outcome of the due diligence audit; and

(b) the balance purchase price of RM9,000,000.00 will only be paid to the respondents' solicitors as stakeholders if they undertake that the funds will only be released to the respondents after the appellant's company secretary confirms that the shares have been registered in the appellant's name.

[8] The respondents' solicitors provided the required undertaking in their letter to the appellant's solicit