Contract – Whether vacant possession delivered to purchaser before occurrence of fire.

Lucy Wong Nyuk King & Anor v Hwang Mee Hiong [2016] 4 CLJ 813

• The appellants (“Lucy”) were the co-proprietors of a double storey intermediate terraced shophouse (“the property”).
• Lucy agreed to sell the property to the respondent (“Hwang”) for RM320,000 via a sale and pur-chase agreement (“the SPA”).
• Hwang had paid a deposit of RM55,000 to Lucy for the purchase of the property, leaving a bal-ance sum of RM265,000 to be settled.
• At the material time, Hwang’s husband was renting the property from Lucy.
• After the SPA was signed, Lucy had not terminated the tenancy agreement and the tenancy con-tinued until the occurrence of a fire on 5th November 2008.
• The fire rendered the property unfit for occupation.
• On 13th November 2008, Hwang served Lucy a notice to terminate the contract pursuant to cl 15 of the SPA and requested for the return of the deposit and part payment of RM85,000 previously paid.
• On 19th January 2009, Lucy asked Hwang to pay the balance of the purchase price within 30 days.
• Hwang thus commenced the present action against Lucy.
• The High Court held in favour of Hwang and found that on the occurrence of a fire, Hwang not having been handed over vacant possession of the property by Lucy, had the right to terminate the SPA.
• According to the High Court, Lucy having continued to maintain possession of the property through the tenancy agreement, and not delivering vacant possession of the property had there-fore justified the termination of the SPA.
• The Court of Appeal agreed with the findings of the High Court.
• Aggrieved, Lucy filed this instant appeal to the Federal Court.

• Clause 15 of the SPA unequivocally provided that in the event before the delivery of vacant pos-session, the property was destroyed or damaged by a fire and other causes, either party was en-titled to unilaterally rescind the contract by a written notice.
• Furthermore, cl. 15 also entitled Hwang as the purchaser to demand a refund of the deposit and all whatsoever monies paid.
• Vacant possession of the property cannot be “deemed” to have been delivered upon signing of the SPA in a situation which would lead to injustice or absurdity.
• In this case, Lucy had claimed and received a sum of RM85,000 from the insurance company as fire insurance compensation for the damage to the property caused by a fire.
• Where the risk and benefit of any insurance of the property still remained with the vendors, i.e. Lucy, it would be unjust or absurd to deem that vacant possession has been delivered to Hwang.

• There was more than sufficient uncontroverted evidence to support the findings of the High Court and the Court of Appeal.

• The fact is that Lucy had never delivered vacant possession of the property to Hwang before the occurrence of a fire on 5th November.

• Under the circumstances, Hwang’s reliance on cl. 15 of the SPA to terminate the agreement was wholly justified and in accordance with the terms and conditions of the SPA.