1. Developer seeks summary judgment for termination of SPA due to purchaser's failure to pay balance purchase price — Purchaser claims right of set-off for late delivery damages. (Para 1 , 2 , 4 )
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2023 MarsdenLR 915
HIGH COURT (KUALA LUMPUR)
HAYATUL AKMAL ABDUL AZIZ, J
Sazean Development Sdn Bhd – Plaintiff
Versus
Maha Pesona Sdn Bhd – Defendant
CIVIL SUIT NO WA-22NCvC-435-06 OF 2021
Advocates:
Ravichandaran Selliah (with Mohd Khairul Azri) (S Ravichandaran & Anuar) for the plaintiff.
Wong Renn Xin (KL Wong) for the defendant.
Ravichandaran Selliah (with Mohd Khairul Azri) (S Ravichandaran & Anuar) for the plaintiff.
Wong Renn Xin (KL Wong) for the defendant.
In a company's liquidation, a purchaser cannot set off liquidated damages against the balance purchase price, as this would grant undue preference over other unsecured creditors. Such claims must be submitted as a Proof of Debt to the liquidator under the pari passu principle.
Headnote:(A) Rules of Court 2012, Order 81 - Summary judgment for specific performance or rescission of agreement - Plaintiff may apply for judgment on the ground that the defendant has no defence (Paras 7.1, 7.7) - Summary jurisdiction should be used with care, but where all issues are clear and no triable issue exists, summary judgment is appropriate (Paras 5.5, 8.1).
(B) Companies Act 2016, Sections 523-528 - Winding up and liquidation - Rights of unsecured creditors - Principle of pari passu - When a company is in liquidation, the law controls what may be set off to prevent undue preference of one creditor over others (Paras 8.3(g), 9.1) - Unsecured creditors, including those claiming liquidated damages for late delivery, must prove their debts by filing a Proof of Debt with the appointed liquidator (Paras 8.3(i), 8.3(k)).
(C) Housing Developers (Control and Licensing) Act 1966, Section 7A(6)(a) - Monies in the Housing Development Account vest in the liquidator upon the developer's winding up to be applied for authorized purposes (Para 5.6(e)).
(D) Sale and Purchase Agreement - Failure to pay the balance purchase price - Fundamental breach and repudiation of contract - Failure to pay the purchase price by the agreed date amounts to a repudiation, entitling the vendor to terminate the agreement (Paras 5.7, 8.2(l)).
Facts of the case:
A developer and a purchaser entered into a sale and purchase agreement. The developer delayed the delivery of vacant possession, leading the purchaser to claim liquidated damages. The purchaser refused to pay the final 20% of the purchase price, asserting a right of set-off against the accrued liquidated damages. The developer was subsequently wound up and placed in liquidation. Although the purchaser had previously obtained High Court orders allowing the set-off and delivery of vacant possession, those orders were set aside by the Court of Appeal. The developer then sought summary judgment to terminate the agreement due to the purchaser's continued non-payment.
Findings of Court:
The court found that there were no triable issues. Since the developer is in liquidation, the purchaser cannot unilaterally set off the balance purchase price against liquidated damages, as this would violate the principle of pari passu and grant undue preference. The purchaser's failure to pay the balance purchase price after the appellate court set aside the set-off orders constituted a fundamental breach of the agreement.
Issues: Whether a purchaser is entitled to set off liquidated damages against the balance purchase price when the developer is in liquidation, and whether such non-payment justifies the termination of the sale and purchase agreement via summary judgment.
Ratio Decidendi: In the liquidation of a company, the assets and liabilities are managed by a liquidator to ensure all unsecured creditors are treated equally. A right of set-off is disallowed if it results in undue preference. Legitimate claims for liquidated damages must be proved as a debt to the liquidator. Consequently, the refusal to pay the balance purchase price is a repudiatory breach of the contract.
Result: Summary judgment allowed.
Act Referred
Rules of Court 2012: O.81 r.11, O.81, O.81 r 1, O.81 r 3
Companies Act 2016: S.526, S.528, S.472, S.523, S.527, S.525(1)
Housing Developers (Control And Licensing) Act 1966: S.7A(6)(a)
Specific Relief Act 1950
Companies Act 1965: S.291(1)
Companies (Winding-Up) Rules 1972: R.78
Bankruptcy Act: S.53(1)
Companies Act 2016: S.526, S.528, S.472, S.523, S.527, S.525(1)
Housing Developers (Control And Licensing) Act 1966: S.7A(6)(a)
Specific Relief Act 1950
Companies Act 1965: S.291(1)
Companies (Winding-Up) Rules 1972: R.78
Bankruptcy Act: S.53(1)
Legal Category Hierarchy
- practice and procedure
- property law
- corporate law
Table of Contents
2. Developer contends balance payment is mandatory and set-off is prohibited during liquidation — Purchaser argues LAD exceeds balance payment, justifying set-off under social legislation. (Para 5 , 6 )
3. The Court found no triable issues as the Court of Appeal had already set aside set-off orders and liquidation laws prohibit undue preference via set-off. (Para 8 , 10 )
4. In liquidation, creditors cannot set-off debts against the company to avoid undue preference; claims for damages must be submitted as proof of debt to the liquidator. (Para 8 , 9 )
5. Summary judgment granted in favor of the plaintiff under Order 81 Rules of Court 2012. (Para 11 )
6. Can a purchaser set off liquidated damages against the balance purchase price when the developer is in liquidation?
No. When a company is in liquidation, the law controls set-offs to prevent undue preference of creditors. Purchasers must pay the balance in full and prove their liquidated damages claims as unsecured debts by filing a proof of debt with the liquidator. (Para 8 , 9 )
7. When is summary judgment under Order 81 Rules of Court 2012 appropriate for SPA disputes?
It is appropriate when the plaintiff establishes a prima facie case that they are entitled to judgment and the defendant fails to show a triable issue or a bona fide defence, allowing for prompt disposition without a full trial. (Para 7 , 8 )
8. Does a Court of Appeal decision remain binding if no written grounds of judgment are provided?
Yes. If the Court of Appeal upholds or sets aside a decision, that decision is binding on the High Court under the doctrine of stare decisis, regardless of whether written grounds were issued. (Para 10 )
9. Does the failure to pay the balance purchase price by the agreed date constitute a repudiation of the SPA?
Yes. In cases where time is of the essence, failure to pay the purchase price according to the agreed schedule is treated as a fundamental breach and a repudiation of the contract. (Para 8 )
Hayatul Akmal Abdul Aziz J:
JUDGMENT
(Enclosure 28)
Introduction
[1]The plaintiff (a developer) seeks to enter a final judgment against the defendant (the purchaser) under O.81 r.11 Rules of Court (RC 2012)
(i)Civil Suit No: WA-22NCvC-436-06/2021 (enclosure 40) Sazean Development Sdn Bhd v Era Jaya Development Sdn Bhd; and
(ii)Civil Suit No: WA-22NCvC-437-06/2021 (enclosure 20) Sazean Development Sdn Bhd v Era Jaya Development Sdn Bhd.
[2]All three applications:
2.1 Were fixed for hearing on 14.12.2022 and the same counsels represented the parties.
2.2 I was duly informed that the parties agreed that my decision on enclosure 28 would bind the other two applications for suits, WA- 22NCvC-436-06/2021 (enclosure 40) and WA-22NCvC-437-06/2021 (enclosure 20), being of similar facts and nature with enclosure 28 save and except for the details of the parties and the property, which is the subject matter of the respective SPAs.
2.3 The plaintiff, in a nutshell, prayed for:
(a)A declaration that the Sales and Purchase Agreement (SPA) with the defendant is terminated because the defendant failed to pay the last 20% of the scheduled payment of the purchase price in the SPA.
(b)An order for the defendant to transfer the said property under the SPA back to the plaintiff free from any encumbrances within fourteen days from the date of the order.
(c)The defendant is to surrender and deliver up vacant possession of the said property to the plaintiff within fourteen days from the date of the order.
(d)A sum of RM64,888.80 (10% of the purchase price) is allowed to be forfeited from the progress payments made under the SPA, and any balance sum of monies to be returned to the defendant must be treated in compliance with the legal provisions and rules applicable to companies in liquidation:
(i)The plaintiff was wound up and placed in liquidation by the Shah Alam High Court on 08.08.2019; BA-28NCC-253- 04/2019; and
(ii)Mr Ling Sie Kiong (750331-13-5245) is the appointed liquidator of the plaintiff presently.
[3]On 14.11.2022, after perusing all cause papers and hearing the submissions of respective counsels, I find that the plaintiff had satisfied the requirements of O.81 RC 2012
BRIEF FACTS
[4]The brief facts gathered from the cause papers and submissions are:
4.1 Plaintiff is a housing developer for Anjung Sari@Bandar Setia Alam Fasa 1 C Setia Alam Selangor.
4.2 On 26.06.2012:
(a)The defendant entered into a sale and purchase agreement (SPA) with the plaintiff for the purchase of Lot No: PH1C-U13/26G-20 (the property) at a purchase consideration of RM648,888.00.
(b)The delivery of vacant possession was scheduled within 24 months, i.e., on 25.06.2014.
(c)The SPA provides that the purchaser/defendant shall pay the purchase price in instalments at the time and in the manner prescribed in the Third Schedule of the SPA.
4.3 The plaintiff claimed that the defendant had refused and failed to pay the last 20% of the said purchase price (RM129,777.60), resulting in the breach of the impugned SPA leading to the plaintiff officially terminating the SPA.
4.4 In contrast, the defendant argued that:
(a)The Certificate of Completion and Compliance (CCC) was issued on 21.05.2019; therefore, the vacant possession is deemed delivered on 21.05.2019 and not 25.06.2014 as scheduled.
(b)The plaintiff, is liable for this delay in the delivery of vacant possession as agreed. The LAD far exceeds the balance of 20% of the purchase price; therefore, the plaintiff is not entitled to ask for it from the defendant.
(c)The defendant claimed a right of set-off of the LAD against the 20% balance purchase price due and payable to the plaintiff, and therefore, the balance 20% purchase price need not be made.
SUBMISSIONS BY THE PLAINTIFF
[5]The plaintiff argued that:
5.1 Just several months before the issuance of the CCC on 21.05.2019, the defendant had sued the plaintiff at the Shah Alam High Court via OS BA-24NCVC-47-01/2019, claiming:
(a)The plaintiff had breached the SPA in failing to deliver vacant possession
