The doctrine of total failure of consideration mandates restitution when a party cannot assign rights they do not possess, distinct from breach of contract claims.

JUDGMENT

Wong Kian Kheong JCA:

A. Introduction

[1] We shall refer to parties as they were in the High Court.

[2] This judgment concerns the following two appeals (2 Appeals) which emanated from one suit in the High Court (This Suit):

(1) appeal No. W-02(NCvC)(W)-439-03/2022 (1st Appeal) had been filed by the first and 2nd plaintiffs ("1st Plaintiff and "2nd Plaintiff' who will be collectively referred to in this judgment as the "Plaintiffs") against the High Court's dismissal of This Suit (Original Action) filed by the Plaintiffs against the defendant (Defendant); and

(2) the Defendant had filed appeal No. W-02(NCvC)(W)-449- 03/2022 (2nd Appeal) against the High Court's dismissal of the Defendant's counterclaim against the Plaintiffs (Counterclaim).

[3] The 2 Appeals were heard together in the Court of Appeal and discussed, among others, the effect of the doctrine of total failure of consideration as follows:

(1) whether the doctrine of total failure of consideration provides for restitutionary or compensatory relief; and

(2) is the application of the doctrine of total failure of consideration distinct from:

(a) a cause of action for breach of contract under s 74(1) of the Contracts Act 1950 ( CA ); and

(b) s 71 CA ?

B. Background

[4] Since 2013, the 1st Plaintiff owed RM20,000,000.00 to the Defendant [1st Plaintiff's Debt (Defendant)].

[5] On 23 June 2015, the Plaintiffs entered into a Sale and Purchase Agreement [SPA (DAL-Plaintiffs)] with DA Land Sdn Bhd (DAL) wherein DAL sold to the Plaintiffs four pieces of land in Rawang [4 Lots (Rawang Land)] at a price of RM23,000,000.00 {Price [SPA (DAL-Plaintiffs)]}.

[6] The Plaintiffs entered into an agreement with the Defendant on 20 October 2015 [Assignment (Plaintiffs-Defendant)]. According to the Assignment (Plaintiffs-Defendant), among others:

(1) clause 1 stated that the Plaintiffs assigned absolutely their rights in the 4 Lots (Rawang Land) to the Defendant for a price of RM25,500,000.00 {Price [Assignment (Plaintiffs-Defendant)]}; and

(2) sub-paragraph 10(a) of the Recital provided that RM20,000,000.00 from the Price [Assignment (Plaintiffs-Defendant)] was set off from the 1st Plaintiff's Debt (Defendant).

[7] The Defendant paid a sum of RM3,000,000.00 to the Plaintiffs pursuant to the Assignment (Plaintiffs-Defendant). Consequently, the Defendant had paid a total sum of RM23,000,000.00 for the Assignment (Plaintiffs-Defendant).

[8] With regard to the Assignment (Plaintiffs-Defendant), an undated supplemental agreement was concluded between the Plaintiffs and Defendant {Supplemental Agreement [Assignment (Plaintiffs-Defendant)]}. The Supplemental Agreement [Assignment (Plaintiffs-Defendant)] provided as follows, among others:

(1) clause 2.2 stated that a sum of RM2,500,000.00 "shall be treated" as the Plaintiffs' "investment in the 4 Lots (Rawang Land); and

(2) according to cl 3, the sum of RM2,500,000.00 "shall represent 4.5% of the value" of the 4 Lots (Rawang Land).

The effect of Supplemental Agreement [Assignment (Plaintiffs-Defendant)] was that the Plaintiffs had only assigned absolutely to the Defendant 95.5% of their interest in the 4 Lots (Rawang Land) for RM23,000,000.00.

[9] On 17 December 2015, seven plaintiffs [Plaintiffs (Suit 688)] filed suit no 22NCvC-688-12/2015 in the Kuala Lumpur High Court (Suit 688) against four defendants [Defendants (Suit 688)]. In Suit 688, among others:

(1) one of the Plaintiffs (Suit 688) was DAL while two of the Defendants (Suit 688) were the Plaintiffs;

(2) the Plaintiffs (Suit 688) alleged that, among others:

(a) the 1st Plaintiff had lent a sum of RM20,000,000.00 to the Plaintiffs (Suit 688) with interest at the rate of 5% per month [Unlicensed Moneylending Transaction (1st Piaintiff-DAL)]; and

(b) the repayment of the Unlicensed Moneylending Transaction (1st Plaintiff-DAL) was secured by way of, among others, the 4 Lots (Rawang Land). Consequently, the SPA (Plaintiffs- DAL) was a sham agreement which had contravened the Moneylenders Act 1951 (MA);

(3) t