When two parties claim the right to purchase the same property under separate agreements with the same seller, which agreement takes precedence? In the case of Teckland Motors Sdn Bhd v Pang Guan Hong & Ors [2024] 9 MLJ 359, the Defendants, as landowners, found themselves at the centre of such a dispute.
This case highlights the legal considerations involved when determining which sale and purchase agreement is valid, and who ultimately holds the rights to the property. This High Court decision sheds light on how conflicting contracts are resolved.
Background
The Defendants were the joint owners of a shop lot in Bandar Nibong Tebal (Property). The Plaintiff and the three Interveners in this case, who were all carrying on businesses nearby, intended to purchase the Property. In or about December 2021, the Interveners offered to purchase the Property at RM250,000.00 with a bank loan. The Defendants accepted a deposit of RM3,000.00 for such a purpose. However, shortly after, the Plaintiff’s representative met the Defendants and offered to purchase the Property at RM240,000.00 in cash.
The Defendants informed the Plaintiff’s representative that they had agreed to sell the Property to the Interveners and had accepted a deposit. The 1st Defendant further informed the Plaintiff’s representative that its offer would only be considered if the Interveners failed to obtain the bank loan or cancelled their purchase, and was conditional upon the 2nd and 3rd Defendants’ agreement to sell the Property to the Plaintiff. Nevertheless, the 1st Defendant accepted a sum of RM20,000.00 from the Plaintiff.
When the Defendants informed the Plaintiff of their intention to proceed with the Interveners’ purchase of the Property, the Plaintiff refused to accept their return of RM20,000.00. Both the Plaintiff and the Interveners lodged a private caveat on the Property, based on the fact that they purportedly had an agreement to purchase the Property from the Defendants. The Defendants were unable to proceed with selling the Property to the Intervener due to the Plaintiff’s private caveat.
Issues
Before the High Court, three main questions fell to be determined to ascertain the validity of the competing claims:
(a) Whether there was a binding sale and purchase agreement between the Defendants and the Interveners prior to any concluded agreement with the Plaintiff and/or whether there was a binding sale and purchase agreement between the Defendants and the Plaintiff?
(b) Whether the Interveners’ rights prevail over the Plaintiff’s purported purchase of the said property?
(c) Whether the Plaintiff had a caveatable interest to lodge a private caveat on the title of the said property?
Question (a)
The High Court referred to the Federal Court case of Low Kar Yit & Ors v Mohamed & Anor [1963] 1 MLJ 165, which established that where a condition is attached to an offer, an unqualified acceptance of that offer must result in a similar situation as will arise on a qualified acceptance of a definite offer. In this case, the Plaintiff’s offer was conditional upon the cancellation of the Interveners’ prior agreement and the consent of all the joint owners of the Property. Since these conditions were not fulfilled, the High Court concluded that no binding contract was formed between the Plaintiff and the Defendants.
Further, the Court applied the ruling in the Court of Appeal case of Eng Song Aluminium Industries Sdn Bhd v Keat Siong Property Sdn Bhd [2018] 5 MLJ 380 and held that there was a binding and valid agreement between the Defendants and the Interveners. The Interveners had made an unqualified offer, which the Defendants accepted, and which was supported by their part performance of paying a deposit. In view of the above, the Court found that the agreement to sell the property to the Plaintiff was a contingent contract under Section 33 of the Contracts Act 1950. Therefore, the Court ruled that the agreement between the Defendants and the Interveners was valid, whilst no binding agreement existed between the Defendants and the Plaintiff.
Question (b)
The High Court relied on the pronouncement of the Federal Court in Syed Ibrahim Bin Syed Abdul Rahman v Liew Su Chin (F) [1984] 1 MLJ 160 in holding that the Interveners’ rights prevail over any of that that may belong to the Plaintiff, as the general equitable rule was that the person whose equity is attached first will be entitled over the priority of others.
Question (c)
The private caveat was based on an alleged sale agreement and deposit payment, but the Plaintiff’s Form 19B indicated the Defendants’ unwillingness to proceed with the sale. Therefore, on the face of Form 19B, the Plaintiff had indicated that the Defendants did not want to sell the Property to the Plaintiff.
The High Court reaffirmed the ruling in Sinku Akramuz Zaman & Ors v Sri Vijaya Estates Sdn Bhd [2022] MLJU 741 and GPQ Sdn Bhd v Constant View Sdn Bhd [2017] 6 MLJ 728 which held that a contract with conditions precedent is unenforceable until the conditions were met. The Court further found support from Mahabuilders Sdn Bhd v Pentadbir Tanah Johor Bahru & Anor [2013] 10 MLJ 625 where it was held that negotiations alone do not grant a caveatable interest without a concluded contract.
Since no binding agreement was in place and the conditions precedent were not fulfilled, the Plaintiff’s private caveat was invalid and had to be removed.
Conclusion
The purpose of Section 33 of the Contracts Act 1950 is to safeguard against the enforcement of contingent contracts that depend on an uncertain future event, ensuring such contracts cannot be enforced by law until the event has actually occurred. This decision is welcomed as it highlights the key principle in equity: when there are two competing equitable interest, the party whose interest was first established takes priority. By doing so, it protects parties from premature or unjust claims, ensuring that obligations are enforced only when all agreed conditions are met. This promotes fairness and clarity in contractual dealings, reduces the potential for disputes and fosters trust in the legal process.
18 September 2024