Case Citation: Kaaba Sdn Bhd v Sarawak Consolidated Industries Bhd [2025] MLJU 1281
Prepared by : Nurul Fatihah binti Mohamad Arof
How the Dispute Arose
A proposed property purchase did not proceed, but the parties continued their dealings through a tenancy arrangement. When a dispute later arose over unpaid rent, the purchaser sought to recover its RM450,000 earnest deposit or use it to offset the rental arrears.
The Sessions Court allowed the refund, finding that the property owner had not obtained its financier’s written consent to the transaction and therefore lacked the capacity to enter into the agreement. The property owner appealed against that decision.
The Key Questions Before the High Court
The appeal concerned whether the purchaser could rely on a separate agreement between the property owner and its financier to challenge the owner’s contractual capacity, and whether the purchaser was entitled to recover the deposit.
What the High Court Decided
The High Court allowed the appeal. It held that the purchaser was not a party to the deed of assignment between the property owner and its financier and could not rely on obligations under that separate agreement to challenge the owner’s contractual capacity.
The High Court also found that the offer to purchase contained clear terms and that payment of the deposit demonstrated the purchaser’s intention to be bound. Its failure to sign the sale and purchase agreement within the agreed 30-day period constituted a breach, justifying forfeiture of the deposit.
Section 66 of the Contracts Act 1950, which concerns the return of benefits received under a void agreement or a contract that becomes void, had therefore been wrongly applied to order the refund.
The Outcome
The order allowing the purchaser’s counterclaim was set aside, with RM15,000 in costs awarded to the appellant. The existing judgment for RM320,000 in rental arrears was not challenged in this appeal.
Why This Decision Matters
The decision highlights the importance of honouring agreed contractual terms and distinguishing those obligations from arrangements involving a separate financier. It also illustrates how a purchaser’s failure to complete a transaction may justify forfeiture of an earnest deposit.
Nurul Fatihah’s Involvement
Nurul Fatihah assisted counsel for the appellant in both the Sessions Court and High Court appeal.
