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JUDGMENT
[1] The plaintiff has taken out a writ action against the defendant seeking inter alia :
1. A declaration that the agreement between the plaintiff and the first defendant has been frustrated and consequently the plaintiff is discharged from its obligations to perform the agreement.
2. In consequence thereof for an order that the first defendant refund the total sum of RM42,071,200 together with interest to the plaintiff.
3. An injunction against the second defendant restraining the second defendant from parting with the sum of RM20,364,080 held by them as stakeholders until the trial of this action.
Brief Facts
[2] By an agreement in writing dated 31 March 1997 (the agreement) the first defendant agreed to sell and the plaintiff agreed to purchase about 1142.48 acres of land (the said land) in Ulu Selangor for a price of RM217,071.200.
[3] The plaintiff had paid an earnest deposit of RM4 million and a further deposit of RM17,707,120 to the first defendant. On 21 March 1998 both parties agreed that the other sum of RM20,364.080 plus interest be paid into court as stakeholders money. Therefore the total sum paid by plaintiff to date is RM42,071,200. The balance sum of RM175 million outstanding according to the plaintiff, was to be paid by the plaintiff after it could obtain a loan. But the plaintiff failed to get the loan from any financial institution. Consequently, the plaintiff wrote to the defendant on 13 December 1997 informing the first defendant that it had failed to raise the said loan to enable the plaintiff to complete the purchase of the said land. Attempts by the parties to resolve this balance of payment also came to naught. Thereafter the plaintiff took out this action for the orders as stated earlier above.
Submissions
[4] The main ground of the plaintiff's action is that the agreement has been frustrated by reason of its inability to get the said loan due to the economic recession and also Bank Negara Malaysia's (BNM) circulars restricting the local financial institutions and banks from giving out loans for purposes as required by the plaintiff. Learned counsel for the plaintiff referred to the case of Davis Contractors Ltd v. Fareham Urban District Counsel [1956] AC 696 at p. 729; p. 43C where Lord Radcliffe said:
Frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract.
It was submitted in the instant case, that the intention of the plaintiff in purchasing the land for the purpose of developing the said land into a small township and to obtain a loan to complete the purchase was made known to the first defendant. This was even referred to in the agreement vide cl. 4.6 which ends with "The parties hereto hearby agree that the loan shall not be in excess of eighty per centum (80%) of the purchase price."
[5] Due to the worsening economic and financial conditions facing the country BNM had issued several circulars to the local financial institutions containing restrictions on advances to the property sector. This culminated in the BNM circular dated 16 February 1997 whereby BNM prohibited financial institutions from lending money "to property projects where construction has not started, including for the construction of low and medium cost residential properties costing RM50,000 and below." Because of this circular, the plaintiff's main financier, that is, Arab Malaysian Merchant Bank Berhad who had agreed to syndicate a loan for the plaintiff to enable plaintiff to pay the balance of the purchase price of the land to the first defendant, failed to do so. Therefore the plaintiff argued that the supervening events by BNM had made the performance of the agreement by the plaintiff impossible or radically different from that contemplated or frustrated.
[6] The first
