Legal Update 4 of 2017

Whether a purchaser who has accepted vacant possession despite defects on the property can claim for a total failure of consideration. 

CASE

TTDI Jaya Sdn Bhd v Yew Hong Teng & Anor [2017] 1 CLJ 436 CA


BRIEF FACTS

  • The first and second respondents ("the plaintiffs") entered into a sale and purchase agreement ("the SPA") with TTDI Jaya Sdn Bhd ("the appellant/defendant/TTDI Jaya") for the purchase of a double-storey terrace house ("the property") at a price of RM 476, 024 ("the purchase price"). 

  • The purchase price had been fully paid by the plaintiffs. 

  • Pursuant to the SPA, TTDI Jaya was supposed to deliver vacant possession within 24 months from the date of the SPA, i.e on or before 23 December 2004.

  • TTDI Jaya notified the plaintiffs that the property had been completed and was ready to be delivered to the plaintiffs. 

  • The plaintiffs accepted vacant or physical possession of the property and after inspecting the same, submitted a complaint form detailing 160 defects to TTDI Jaya. 

  • Remedial works were carried out by TTDI Jaya but the plaintiffs were not satisfied, thus refered to acknowledge and accept that the defects have been rectified.

  • However, the property was still registered in the names of the plaintiffs without their objections. 

  • After holding on to the property for about five years, the plaintiffs commencd an action at the High Court, seeking (i) a declaration that TTDI Jaya faile to complete and deliver vacant possession to the plaintiffs before the stipulated date under the SPA was rescinded; (ii) a refund for the purchase price;and (iii) damages for breach of contract. 

  • In allowing the plaintiff's claim, the High Court held that the plaintiffs had the right to rescind the contract as there was a total failure of consideration. 

  • Hence, the present appeal by TTDI Jaya. 

  • The issues that arose for the court's adjudication were:

    1. Whether there was a total failure of consideration in respect of the SPA; and 

    2. Whether the Plaintiffs could approach the court to seek remedy in the form of rescission of the SPA


DECISION : TTDI Jaya's Appeal Allowed

  • The plaintiffs submitted the complaint form two months after TTDI Jaya notified them that the property was completed and ready to be delivered to the plaintiffs. 

  • The plaintiffs had accepted vacant possession of the property as provided in the SPA and identified some 160 defects to be rectified by TTDI Jaya.

  • If it was true that there was a total failure of consideration, a reasonable purchaser would have rejected the property at the outset and exerted his rights for a rescission of the SPA and not wait for several years to elapse before deciding to rescind the SPA. 

  • The plaintiffs claim for rescission of the SPA was unsupported by contemporaneous documents and/or evidence. 

  • The following conduct strenghtens the Court's finding that the claim for a rescission of the SPA was merely an afterthought to justify the Plaintiff's claim for a rescission of the SPA:

    1. The plaintiffs had submitted the complaint forms in response to the notice issued by TTDI Jaya that the property was ready for delivery of vacant possession; 

    2. The plaintiffs continued to repay the housing loan to their financier, Maybank until the loan had been fully paid and discharged form had been signed;

    3. The plaintiffs had paid all outgoings such as quit rent of the said property as required under the SPA; and 

    4. The plaintiffs consented for their names to be registered in the issue documnet of title to signify that they are the registered owners of the property. They continue to be registered owner of the property up to now and three years preceding the commencement of this action.

  • The plaintiffs did nothing to mitigate their losses. 

  • They were not satisfied with the rectification of defects by TTDI Jaya and had decided to abandon the property despite the same had been registered in their names. 

  • The plaintiffs could not , at this stage, claim there was a total failure of consideration especially when they had sat on their rights. 

  • Thus, the plaintiffs are estopped from denying that they had taken vacant possession of the property pursuant to the SPA. 

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