CLJ - 2010 - 1 - 309 - BC01034 (Extra Case) - Maxim of Equity

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Berjaya Times Square Sdn Bhd

[2010] 1 CLJ v. M-Concept Sdn Bhd 309

A BERJAYA TIMES SQUARE SDN BHD

v.

M-CONCEPT SDN BHD


B COURT OF APPEAL, PUTRAJAYA
ZALEHA ZAHARI JCA
RAUS SHARIF JCA
ABDUL MALIK ISHAK JCA
[CIVIL APPEAL NO: W-02-546-2004]
C 11 MAY 2009

CONTRACT: Breach - Building contract - Agreement for sale of shop-


lot in building - Vendor unable to deliver vacant possession by specified
time - Whether purchaser entitled to rescind agreement, recover moneys
D paid and claim damages - Whether provision for liquidated damages for
late delivery disentitled purchaser from rescinding agreement - No
provision on rescission in agreement, whether consequential - Purchaser
continuing to make instalment payments, whether a waiver of right to
rescission - Contracts Act 1950, s. 56(1)
E
CONTRACT: Rescission - Building contract - Agreement for sale of
shop-lot in building - Vendor unable to deliver vacant possession by
specified time - Whether time of essence of agreement - Whether purchaser
entitled to rescind agreement, recover moneys paid and claim damages -
Whether provision for liquidated damages for late delivery disentitled
F
purchaser from rescinding agreement - No provision on rescission in
agreement, whether consequential - Purchaser continuing to make
instalment payments, whether a waiver of right to rescission - Whether
purchaser stopped from rescinding agreement - Contracts Act 1950,
s. 56(1)
G
CONTRACT: Rescission - Consequences, of - Contracts Act 1950
s. 65 - Option of innocent party to rescind contract and sue for damages
- Outstanding obligations need no longer be performed by either party

H EQUITY: Maxims of equity - He who comes into equity must come


with clean hands - Whether conformed with - Whether party in breach
of contract can claim innocent party estopped from rescinding contract

By way of a sale and purchase agreement dated 24 August 1995


(“agreement”), the plaintiff/respondent purchased at the price of
I
RM1,149,771 a commercial shop lot (“the property”) developed
by the defendant/appellant. By cl. 22(1) of the agreement, the
defendant was required to deliver vacant possession of the
310 Current Law Journal [2010] 1 CLJ

property to the plaintiff 36 months from the date of the agreement A


(“the completion date”) and there was also an automatic extension
of three months from the expiry of the completion date (“the
extended period”). The property was not completed nor delivered
to the plaintiff by the extended period. The plaintiff had paid the
full purchase price of the property. Upon the plaintiff’s notices of B
intention to terminate the agreement, the defendant had twice
promised to complete and deliver the property at later dates but
all these promises came to nought. In fact, on 20 March 2003
when the plaintiff filed the originating summons seeking for a
declaration that the plaintiff had rescinded the agreement together C
with the other reliefs, the defendant had still failed to deliver
vacant possession of the property. On 30 June 2003, the property
was completed and ready for delivery of vacant possession. The
defendant claimed that the plaintiff could not rescind the
agreement but could only claim liquidated damages. The issue D
before the court was whether the failure by the defendant to
deliver vacant possession of the property on or before the
completion date constituted a fundamental breach of the contract
which entitled the plaintiff to rescind the agreement. The learned
High Court judge answered the question in the affirmative and E
allowed the plaintiff’s claim. Hence this appeal.

Held (dismissing the appeal with costs)


Per Zaleha Zahari & Raus Sharif JJCA:
F
(1) The defendant’s failure to deliver vacant possession rendered
the agreement voidable. The plaintiff therefore had an option
under s. 56(1) of the Contracts Act 1950 (“the Act”) either
to continue with the contract or to rescind it. Even though
the agreement did not expressly provide for the plaintiff’s right
G
to terminate it, this did not take away the plaintiff’s right to
do so under s. 56(1) when the defendant had clearly
committed a fundamental breach by failure to complete and
deliver vacant possession within the stipulated period. Similarly,
the plaintiff’s entitlement to liquidated damages for any delay
H
in delivery of vacant possession did not take away the
plaintiff’s right to rescind and terminate the agreement.
(paras 13 & 17)

(2) The argument that the plaintiff was estopped from rescinding
the agreement because the plaintiff had chosen not to I
terminate or rescind the agreement immediately after the
alleged breach but had made progressive payments was
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 311

A without merit. Estoppel is an equitable doctrine. It can only be


invoked by the party who comes to court with clean hands.
The defendant did not come to court with clean hands to rely
on the doctrine. The defendant had clearly breached its
contractual obligation. (paras 19 & 20)
B
Per Abdul Malik Ishak JCA:

(1) Time was the essence of the contract, and there was delay
on the part of the defendant to deliver vacant possession of
the property. The delay was far too excessive and could not
C
be tolerated. (para 59)

(2) Section 56(1) of the Act must be read together with s. 65 of


the Act which provides for the consequences of rescission of
a voidable contract. The innocent party or the party who is
D not in default may put an end to the contract - in the sense
that any obligations then outstanding need no longer be
performed by either party, and the innocent party too may sue
for damages for any loss suffered as a result of the defaulting
party’s non-performance. The plaintiff here had done just that.
E The plaintiff was also entitled to post-rescissionary damages.
(paras 59, 64 & 72)

Bahasa Malaysia Translation Of Headnotes

Melalui satu perjanjian jual beli bertarikh 24 Ogos 1995 (‘perjanjian


F
tersebut’), plaintif/responden telah memperolehi sebuah shop lot
komersial (‘hartanah tersebut’) pada harga RM1,149,771 yang
dibangunkan oleh defendan/perayu. Melalui kl. 22(1) perjanjian
tersebut, defendan dikehendaki menyerahkan milikan kosong
hartanah tersebut kepada plaintif dalam masa 36 bulan dari tarikh
G
perjanjian (‘tarikh penyelesaian’) dan juga terdapat tempoh lanjutan
automatik tiga bulan dari tarikh habis tempoh (‘tempoh lanjutan’).
Hartanah tersebut gagal disiapkan serta tidak diserahkan kepada
plaintif dalam tempoh-tempoh yang diberi walaupun plaintif telah
membuat bayaran harga penuh hartanah tersebut. Berdasarkan
H
notis-notis yang telah diberi plaintif untuk menamatkan perjanjian
tersebut, defendan telah beberapa kali berjanji untuk menyiapkan
dan menyerahkan hartanah tersebut pada tarikh-tarikh lain tetapi
telah memungkiri janji-janji yang diberi. Seterusnya, pada 20 Mac
2003, apabila plaintif memfailkan saman pemula memohon satu
I
deklarasi bahawa plaintif telah membatalkan perjanjian, defendan
masih gagal menyerah milikan kosong hartanah tersebut. Pada
tarikh 30 Jun 2003, tanah tersebut disiap selesai dan bersedia
312 Current Law Journal [2010] 1 CLJ

untuk penyerahan milikan kosong. Menurut defendan, plaintif tidak A


dibenarkan untuk membatalkan perjanjian tersebut tetapi hanya
berhak menuntut ganti rugi jumlah tertentu. Isu yang timbul
adalah sama ada kegagalan defendan menyerah milikan kosong
tanah tersebut pada atau sebelum tarikh penyelesaian adalah satu
kemungkiran asasi perjanjian yang memberi hak kepada plaintif B
untuk membatalkan perjanjian tersebut. Hakim Mahkamah Tinggi
telah menjawab soalan ini secara afirmatif dan membenarkan rayuan
plaintif. Oleh itu, perayu telah membuat rayuan ini.

Diputuskan (menolak rayuan dengan kos) C


Oleh Zaleha Zahari & Raus Sharif HHMR:

(1) Kegagalan defendan untuk menyerah milikan kosong telah


menyebabkan perjanjian tersebut dibatalkan. Plaintif mempunyai
opsyen di bawah s. 56(1) Akta Kontrak 1950 (‘Akta itu’)
D
untuk menyambung perjanjian atau membatalnya. Walaupun
perjanjian tidak mensyaratkan bahawa plaintif berhak untuk
membatalkan perjanjian tersebut, ini tidak mengambil hak
plaintif untuk berbuat demikian di bawah s. 56(1) apabila
defendan telah secara terang-menerang melakukan kemungkiran
E
fundamental dengan kegagalannya untuk meyiap sediakan dan
menyerah milikan kosong hartanah tersebut dalam tempoh
masa yang diberi. Hak plaintif untuk menuntut ganti rugi
jumlah tertentu untuk kelewatan penyerahan milikan kosong
tidak mengambil hak plaintif untuk membatal dan menamatkan
F
perjanjian.

(2) Hujahan bahawa plaintiff diestop daripada membatalkan


perjanjian tersebut sebab plaintif tidak menamatkan perjanjian
dengan segera selepas kemungkiran defendan tetapi telah
membuat bayaran secara progresif tidak mempunyai merit. G
Estoppel adalah doktrin ekuiti. Ia hanya boleh digunakan oleh
pihak yang datang ke mahkamah dengan tangan yang bersih.
Defendan di dalam kes ini tidak datang ke mahkamah dengan
tangan yang bersih untuk bergantung kepada doktrin ini.
Defendan telah melanggar obligasi kontraktualnya. H

Oleh Abdul Malik Ishak HMR:

(1) Masa adalah intipati perjanjian, dan telah berlakunya kelewatan


dari pihak defendan untuk menyerah milikan kosong hartanah
I
tersebut. Kelewatan tersebut adalah terlalu lama and tidak
boleh dilayani.
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 313

A (2) Seksyen 56(1) Akta tersebut patut dibaca dengan s. 65 Akta


tersebut yang memperuntukkan mengenai akibat penamatan
kontrak yang boleh batal. Pihak yang tidak bersalah boleh
membatal perjanjian - dalam keadaan di mana obligasi yang
belum dilaksanakan tidak perlu dilakukan oleh mana-mana
B pihak, dan pihak yang tidak bersalah boleh menuntut ganti rugi
bagi apa-apa kerugian yang ditanggung akibat dari pihak yang
telah melanggar kontrak. Plaintif di sini telah berbuat demikian.
Plaintif juga berhak menuntut gantirugi pasca pembatalan.

C Case(s) referred to:


Abdul Rahim Syed Mohd v. Ramakrishnan Kandasamy; Wan Ahmad Azlan
Wan Majid & Anor (Interveners) [1996] 3 CLJ 393 HC (refd)
Chanter v. Hopkins [1838] 4 M & W 399 (refd)
Cheng Chuan Development Sdn Bhd v. Ng Ah Hock [1982] 1 LNS 48 FC
(refd)
D Chye Fook & Anor v. Teh Teng Seng Realty Sdn Bhd [1988] 1 LNS 213
CA (refd)
Cookson (Widow And Administratrix of the Estate of Frank Cookson, Decd)
v. Knowles [1979] AC 556 (refd)
Eng Mee Yong & Ors v. V Letchumanan [1979] 1 LNS 18 PC (refd)
E Ganam Rajamany v. Somoo Sinnah [1984] 2 CLJ 268; [1984] 1 CLJ (Rep)
123 FC (refd)
Hanson v. Radcliffe Urban District Council [1922] 2 Ch 490 (refd)
Ismail Haji Embong v. Lau Kong Han [1970] 1 LNS 40 HC (refd)
Jamshed Khodaram Irani v. Burjorji Dhunjibhai [1915] LR 43 IA 26 (refd)
Lai Yew Seong v. Wong Chieu Gook [1913] FMS LR 125 (refd)
F Law Ngei Ung & Anor v. Tamansuri Sdn Bhd [1989] 2 CLJ 181; [1989]
2 CLJ (Rep) 44 HC (refd)
Lim Yee Khei v. Berjaya Times Square Sdn Bhd [2003] 1 CLJ 527 HC
(refd)
Linggi Plantations Ltd v. Jagatheesan [1971] 1 LNS 66 PC (refd)
G
Muhammad Habidullah v. Bird and Company [1922] AIR 178 PC (refd)
Photo Production Ltd v. Securicor Ltd [1980] AC 827 (refd)
S Ayadurai v. Lim Hye [1959] 1 LNS 89 HC (refd)
Sim Chio Huat v. Wong Ted Fui [1983] 1 CLJ 178; [1983] CLJ (Rep) 363
FC (refd)
Tan Yang Long & Anor v. Newacres Sdn Bhd [1992] 1 CLJ 211; [1992]
H 3 CLJ (Rep) 666 HC (refd)
Vine v. National Dock Labour Board [1957] AC 488 (refd)
Xavier Kang Yoon Mook v. Insun Development Sdn Bhd [1995] 2 CLJ 471
HC (refd)

Legislation referred to:


I Contracts Act 1950, ss. 56(1), 65

Contract Act 1872 [India], s. 55


314 Current Law Journal [2010] 1 CLJ

For the appellants - R Thayalan (VK Lashmi with him); M/s VK Lashmi & A
Co
For the 1st respondent - Rosli Dahlan (SC Cheah & TM Liew with him);
M/s Lee Hishammuddin Allen & Gledhill

[Appeal from High Court, Kuala Lumpur; Originating Summons No: S3-24-
473-2003] B

[Editor’s note: For the High Court judgment, please see M-Concept Sdn Bhd
v. Berjaya Times Square Sdn Bhd [2004] 4 CLJ 852.]

Reported by Amutha Suppayah


C

JUDGMENT

Zaleha Zahari & Raus Sharif JJCA:


D
[1] This is an appeal by the defendant against the decision of
the learned High Court judge, Kuala Lumpur, given on 6 May
2004. We heard and unanimously dismissed the appeal with costs.
We now give our reasons. But first the facts.
E
[2] On 24 August 1995, the plaintiff and the defendant entered
into a sale and purchase agreement (“agreement”) in respect of a
property known as parcel No. 07-63 Commercial Shop Lot
Berjaya Star City and now known as Berjaya Times Square
(“property”). The plaintiff was the purchaser and defendant was F
the seller.

[3] The purchase price of the property was RM1,149,971


(“purchase price”). The plaintiff paid RM1,034,793.90 being 90%
of the total purchase price to the defendant (“monies paid”), part
G
of which was financed by a loan from AmBank Berhad.

[4] Under cl. 22(1) of the agreement, the completion date for
the property was 36 months from the date of agreement
(completion date). Under the same clause, there was an automatic
extension of three months from the expiry of the completion date. H
The completion date of 36 months expired on 23 August 1998.
The extended period of three months expired on 23 November
1998. However, the construction of the property was not
completed and delivered to the plaintiff within the extended period
or on or before 23 November 1998 as according to the I
agreement.
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 315

A [5] After 23 November 1998, the plaintiff’s director, Lee


Teen Nguan, met the sales and marketing officers of the
defendant; others Ms. Esther and Ms. Pey Yee, who promised
that the construction of the property would be completed by the
end of 2001. Again, the defendant failed to keep its promise.
B
[6] On 27 December 2001, the plaintiff’s former solicitors,
Messrs Gan & Low, issued a letter, informing the defendant that
the plaintiff had decided to rescind the agreement. The reason to
rescind being the defendant had committed a fundamental breach
C of its contractual obligation ie, to complete and deliver vacant
possession of the property to the plaintiff on or before the
completion date.

[7] The defendant refused to accept the recission of the


agreement. In a letter dated 3 January 2002, the defendant
D
claimed that the plaintiff was not entitled to rescind the agreement,
instead would only be entitled to claim for liquidated damages.

[8] Subsequently, the plaintiff sought consent and obtained


reassignment of all right, title and interest from AmBank to institute
E legal proceedings against the defendant.

[9] But on 1 October 2002, when the plaintiff’s director, Lee


Teen Nguan met the defendant’s sales and marketing officer,
Ms Dianne Chan, he was assured that vacant possession of the
F property would be delivered by end of 2002.

[10] Despite the assurance, the defendant again failed to complete


and deliver vacant possession. As a consequence thereto, on
5 March 2003, the plaintiff’s solicitors sent a letter demanding the
defendant to accept the rescission of the agreement, to refund the
G
monies paid and to pay all damages suffered by the plaintiff within
14 days.

[11] The defendant in letter dated 10 March 2003 disputed the


plaintiff’s right to rescind the agreement. Hence, the plaintiff filed
H this originating summons seeking the following orders:

(i) a declaration that the plaintiff had rescinded the agreement


dated 24 August 1995 entered into between the plaintiff and
the defendant vide a letter dated 27 December 2001 from the
I plaintiff’s solicitors, Messrs Gan & Low to the defendant;
316 Current Law Journal [2010] 1 CLJ

(ii) the defendant shall repay the plaintiff the sum of A


RM1,149,771 being the 100% of the purchase price already
paid by the plaintiff to the defendant under the agreement;

(iii) the defendant shall pay the plaintiff a sum of RM241,820.99


as at 27 December 2001 being the financing costs, legal B
expenses and others incurred by the plaintiff for the purpose
of purchasing the property;

(iv) the defendant shall pay the plaintiff all financing costs, legal
expenses and others incurred by the plaintiff for the purpose
C
of purchasing the property from 27 December 2001 till the
date of the order where the damages would be assessed by
the Senior Assistant Registrar;

(v) the defendant shall pay the plaintiff damages as a result of the
defendant’s breach of the agreement for a sum to be assessed D
by the Senior Assistant Registrar;

(vi) the defendant shall pay the plaintiff interest at the rate of 8%
per annum on all sums to be paid from the date of the order
to the date of full settlement; E

(vii) cost of the application and incidental costs thereto be fixed on


a solicitor client basis to be paid by the defendant to the
plaintiff.

[12] The learned High Court judge granted the orders as prayed F
by the plaintiff. The main issue before the High Court as well as
before us is whether the failure by the defendant to deliver vacant
possession of the property on or before the completion date
constitutes a fundamental breach of the contract which entitles the
plaintiff to rescind the agreement. The learned High Court judge G
answered the question in the affirmative. He reasoned as follows:
The failure of the defendant to deliver vacant possession of the
property after 23 November 1998, as agreed under clause 22(1)
of the agreement, for nearly 4 years and 4 months until the H
present originating summons was filed, amounts to a fundamental
breach of the agreement by the defendant. The delay on the part
of the defendant is excessive and unreasonable given the fact that
the defendant was required to deliver vacant possession of the
property to the plaintiff within 36 months from the date of signing
of the agreement. As under the agreement time is essential, the I
failure on the part of the defendant to deliver vacant possession
at the stipulated time renders the agreement voidable at the option
of the plaintiff (see section 56(1) of the Contract Act 1950).
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 317

A [13] We are of the same view. The defendant’s failure to deliver


vacant possession has rendered the agreement voidable. The
plaintiff therefore had an option either to continue with the
contract or to rescind it. Section 56(1) of the Contracts Act
1950, clearly gives the plaintiff that option. The section reads:
B
When a party to a contract promises to do a certain thing at or
before a specified time, or certain things at or before specified
times, and fails to do any such thing at or before the specified
time, the contract, or so much of it as has not been performed,
becomes voidable at the option of the promisee, if the intention
C of the parties was that time should be of the essence of the
contract.

[14] The application of s. 56(1) of the Contract Act 1950 had


been dealt with by the High Court in a number of cases. In Tan
D Yang Long & Anor v. Newacres Sdn. Bhd. [1992] 1 CLJ 211;
[1992] 3 CLJ (Rep) 666, an identical application as in the present
originating summons was filed and adjudicated by the High Court.
In that case the agreement provides that the delivery of vacant
possession of the property was to be on or before 17 March
E 1988. The defendant failed to comply with it. It was held by
Shankar J (as he then was):
The total failure of the defendant to give any credible assurances
as to if and when the project would be completed amounted to a
renunciation or abandonment of the agreement. Its conduct
F amounted to a fundamental breach of agreement.

In that case, it was argued by the developer that the only remedy
available is a claim for liquidated damages instead of the
termination of the agreement, but it was rejected by the court.
G
[15] Again, a similar issue was decided by Sibu High Court in
favour of the purchaser in the case of Law Ngei Ung & Anor v.
Tamansuri Sdn. Bhd. [1989] 2 CLJ 181; [1989] 2 CLJ (Rep) 44.
In that case, it was held by Chong Siew Fai J (as he then was)
that:
H
... the defendant had in fact failed to complete the premises within
the time stipulated in the agreement which made time of the
essence of the agreement and the defendant’s failure to complete
the premises amounted to a renunciation or abandonment of the
I agreement and that the defendant had evinced an intention not to
be bound by the agreement.
318 Current Law Journal [2010] 1 CLJ

Further his Lordship stated: A

... the agreement dated 17 October 1983 was rescinded as on 4


July 1986 by reason that the defendant had committed a
fundamental breach of the agreement in that the defendant had
failed to complete and deliver vacant possession.
B
[16] Abdul Malek bin Ahmad J (as he then was) in Chye Fook &
Anor v. Teh Teng Seng Realty Sdn Bhd [1988] 1 LNS 213 and
Abdul Malik bin Ishak J (as he then was) in Xavier Kang Yoon
Mook Xavier v. Insun Development Sdn Bhd [1995] 2 CLJ 471,
decided similarly. C

[17] We adopt the same approach. We hold that even though


the agreement does not expressly provide for the plaintiff’s right
to terminate it, this would not take away the plaintiff’s right to do
so under s. 56(1) of the Contracts Act 1950, when the defendant D
had clearly committed a fundamental breach by failure to complete
and deliver vacant possession within the stipulated period.
Similarly, the plaintiff’s entitlement to liquidated damages for any
delay in delivery of vacant possession does not take away the
plaintiff’s right to rescind and terminate the agreement. E

[18] There is a further point we must mention. It was argued


that the plaintiff is estopped from rescinding the agreement
because the plaintiff had chosen not to terminate or rescind the
agreement immediately after the alleged breach. On the contrary,
F
the plaintiff had, in fact, elected to make progressive payments
and thus affirming the agreement.

[19] With respect, the argument is without merit. Estoppel is an


equitable doctrine. It could only be invoked by the party who
comes to court with clean hands (see Cheng Chuan Development Sdn G
Bhd v. Ng Ah Hock [1982] 1 LNS 48).

[20] On the facts of this case, we are unable to hold that the
defendant came to the court with clean hands to rely on the
doctrine. The defendant had clearly breached its contractual H
obligation by failing to complete the construction of the property
by 23 November 1998 or any other promised dates. Even, as at
the date of filing of the originating summons on 20 March 2003,
the defendant had still failed to deliver vacant possession of the
property. I
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 319

A [21] It is true that the plaintiff did not immediately decide to


rescind the agreement after the defendant had failed to deliver
vacant possession of the property on 23 November 1998. But,
this is because after 23 November 1998, the defendant’s officers
had given assurances and promises that the property would be
B completed within other specific times, initially by the end of 2001
and later by the end of 2002. The plaintiff therefore decided to
give the defendant more time to complete the property. But the
defendant totally failed to keep its promise. In any event, the
plaintiff is obliged to make progressive payments after receiving
C written notices from the defendant (cl. 3 of the agreement). If the
plaintiff had failed to make any progressive payment, this would be
regarded as a breach which entitles the defendant to terminate the
agreement (cl. 5(1) of the agreement).

D [22] For the aforesaid reasons, we unanimously upheld the


decision of the learned High Court judge. We dismissed the appeal
with costs. The deposit of this appeal was ordered to be paid to
the plaintiff to account of its taxed costs.

Abdul Malik Ishak JCA:


E
Introduction

[23] I have read the judgment in draft of my learned brother


Raus Sharif, JCA and I would like to add my own reasons for
F dismissing this appeal with costs.

[24] For convenience, the parties shall be referred to in the same


manner as they were referred to in the High Court. The parties
will be described as the plaintiff and the defendant accordingly.
G Facts Of The Case

[25] By way of a sale and purchase agreement (hereinafter


referred to as the “agreement”), the plaintiff (who was the
respondent in this appeal) purchased at the price of RM1,149,771
H a commercial shop lot (hereinafter referred to as the “property”)
developed by the defendant (who was the appellant in this
appeal). That agreement was dated 24 August 1995 and by
cl. 22(1) of the agreement, the defendant was required to deliver
vacant possession of the property to the plaintiff 36 months from
I the date of the agreement (hereinafter referred to as the
“completion date”) and there was also an automatic extension of
three months from the expiry of the completion date (hereinafter
referred to as the “extended period”).
320 Current Law Journal [2010] 1 CLJ

[26] Calculation wise, the completion date expired on 23 August A


1998 and the extended period expired on 23 November 1998.

[27] The property was not completed nor delivered to the plaintiff
by the extended period. In fact, on 20 March 2003 when the
plaintiff filed the originating summons seeking for the principal relief B
of a declaration that the plaintiff had rescinded the agreement
together with the other reliefs, the defendant had still failed to
deliver vacant possession of the property.

[28] On 27 December 2001, the plaintiff’s former solicitors wrote


C
a letter to the defendant informing the latter that the plaintiff had
decided to rescind the agreement.

[29] The plaintiff’s former solicitors’ letter dated 27 December


2001 also demanded payment of RM1,704,329.70 and the
defendant said that this sum was an extortionate claim. D

[30] On 3 January 2002, the defendant by letter rejected the


plaintiff’s unilateral rescission of the agreement and averred that
the plaintiff was only entitled to claim for liquidated damages.
E
[31] There were two significant episodes that have to be
mentioned. Firstly, after the expiry of the extended period, the
plaintiff’s director by the name of Lee Teen Nguan met with the
defendant’s sale and marketing officers namely, Ms Esther and Ms
Pey Yee and they promised that the property would be completed
F
by the end of 2001. But, unfortunately, the defendant still failed
to deliver vacant possession of the property to the plaintiff as
promised. Secondly, again on 1 October 2002, Lee Teen Nguan
met the defendant’s sale and marketing officer by the name of Ms
Dianne Chan and the latter gave an assurance that vacant
G
possession of the property would be delivered by the end of 2002.
Again, the assurance came to nought and the vacant possession
of the property remain undelivered.

[32] On 5 March 2003, the plaintiff’s former solicitors wrote to


the defendant’s solicitors and requested the defendant to accept H
the plaintiff’s rescission of the agreement and it also requested the
defendant to give an undertaking to refund all the monies paid by
the plaintiff as well as to settle any other damages sustained by
the plaintiff within 14 days.
I
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 321

A [33] On 10 March 2003, the defendant by letter rejected the


plaintiff’s request and categorically said, “Please be informed that
the construction works of the project is nearing completion and
we expect to hand over the property by July of this year.”

B [34] On 20 March 2003, the plaintiff filed the originating summons


at the High Court registry after it obtained the consent and re-
assignment of all rights, title and interests from the plaintiff’s
financier AmBank Berhad to institute legal proceedings against the
defendant.
C
[35] On 30 June 2003, the property was completed and ready for
delivery of vacant possession.

[36] On 1 July 2003, the plaintiff’s financier AmBank Berhad paid


on behalf of the plaintiff, the final 10% of the purchase price in
D the sum of RM114,977.10 to the defendant. This meant that the
plaintiff had paid the full purchase price of the property.

[37] On 1 July 2003, the defendant sent a letter to the plaintiff


notifying the latter to take delivery of vacant possession of the
E property.

[38] On 16 July 2003, the defendant issued an official receipt


acknowledging payment of the final 10% amounting to
RM114,977.10.
F [39] The plaintiff had by their solicitors’ letter dated 5 December
2003 refused to take vacant possession of the property pending
the outcome of the originating summons application in the High
Court.

G [40] The delay in completing and delivering of vacant possession


of the property calculated from the extended period of
23 November 1998 to 30 June 2003 would be four years seven
months seven days.

[41] It must be borne in mind that cl. 32 of the agreement


H
stipulates that time shall be of the essence in relation to all
provisions of the agreement.

[42] The learned High Court judge gave judgment in favour of


the plaintiff and the defendant filed an appeal to this court against
I that decision. We agreed with the decision of the learned High
Court judge and unanimously dismissed the appeal with costs. The
deposit of this appeal was ordered to be paid to the plaintiff to
account of its taxed costs.
322 Current Law Journal [2010] 1 CLJ

Analysis A

[43] Five observations must be made here.

[44] Firstly, although the plaintiff had fulfilled its obligation by


making those payments under cl. 3(1) of the agreement, yet the
B
defendant failed to deliver vacant possession of the property on
the completion date or on the extended period or on or before
any other date as promised by the defendant.

[45] Secondly, the defendant held the views that the plaintiff was
not entitled to rescind the agreement for late delivery of the C
property but rather the plaintiff was entitled to claim liquidated
damages calculated from day to day at the rate of 12% per annum
of the purchase price from the date of the expiry of the extended
period up to the date of delivery of vacant possession of the
property under cl. 22(2) of the agreement. D

[46] Thirdly, it was never the defendant’s case that the


agreement was frustrated because of the delay in handing over
vacant possession of the property to the plaintiff.
E
[47] Fourthly, because of the long delay in handing over vacant
possession of the property, the plaintiff had no alternative but to
file the originating summons before the learned High Court judge
and sought for a declaration that the plaintiff was entitled to
rescind the agreement as well as to seek a refund of the monies
F
paid and to recover all damages suffered as a result of the
defendant’s breach under the agreement and, in addition thereto,
to recover financing costs, legal expenses incurred by the plaintiff
in purchasing the property as well as interest at the rate of 8%
per annum on all sums to be paid from the date of the order to
G
the date of full settlement together with costs of the application
and incidental costs on a solicitor client basis to be paid by the
defendant to the plaintiff.

[48] Fifthly, a declaration is a discretionary remedy and it is up


to the court to grant it. The discretionary element was H
emphasised by Lord Sterndale MR in Hanson v. Radcliffe Urban
District Council [1922] 2 Ch 490 at 507 in these salient words:
... the power of the Court to make a declaration, where it is a
question of defining the rights of two parties, is almost unlimited; I
I might say only limited by its own discretion. The discretion
should of course be exercised judicially, but it seems to me that
the discretion is very wide.
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A [49] The High Court judge granted the declaratory reliefs sought
by the plaintiff and this court would only interfere if it can be
shown that the learned High Court judge has exercised his
discretion wrongly. Here, nothing was shown to us to merit our
interference with the exercise of discretion by the learned High
B Court judge. Reasons were given by the learned High Court judge
and those reasons showed that the discretion was not exercised
in a selective and discretionary manner, and neither was it done
arbitrarily or decided upon his own judicial whim (see the speech
of Lord Diplock in Cookson (Widow And Administratrix of the Estate
C of Frank Cookson, Decd) v. Knowles [1979] AC 556, 565 HL). And
Viscount Kilmuir LC in Vine v. National Dock Labour Board [1957]
AC 488 at 500 rightly said that, “the discretion should not be
exercised save for good reason”.

D [50] Here, the crucial issue for determination was whether the
failure by the defendant to deliver vacant possession of the
property on the completion date or on the extended period or on
or before any other date as promised by the defendant constitutes
a fundamental breach of the contract which entitles the plaintiff
E to rescind the agreement. In considering this crucial issue, it must
be borne in mind that time has been made the essence of the
contract. That being the case, s. 56(1) of the Contracts Act 1950
should be invoked and that section provides that failure to
perform within a fixed time in a contract, where time is essential,
F would render the contract voidable.

[51] There is a Privy Council’s case that goes by the name of


Jamshed Khodaram Irani v. Burjorji Dhunjibhai [1915] LR 43 IA 26
which held that the equipollent s. 55 of the Indian Contract Act
(ours is s. 56 of the Contracts Act 1950) did not lay down any
G
principle which differed from the equitable principles as set out in
the English law relating to time in contracts for sale of a piece of
land. In delivering the judgment of the board, Viscount Haldane
had this to say at pp. 31 to 32:
H The law applicable to the point is contained in s. 55 of the Indian
Contract Act, 1872, which provides that ‘when a party to a
contract promises to do a certain thing at or before a specified
time, or certain things at or before specified times, and fails to
do any such thing at or before the specified time, the contract, or
I
so much of it as has not been performed, becomes voidable at
the option of the promisee, if the intention of the parties was that
time should be of the essence of the contract.
324 Current Law Journal [2010] 1 CLJ

Their Lordships do not think that this section lays down any A
principle which differs from those which obtain under the law of
England as regards contracts to sell land. Under that law equity,
which governs the rights of the parties in cases of specific
performance of contracts to sell real estate, looks not at the letter
but at the substance of the agreement in order to ascertain
B
whether the parties, notwithstanding that they named a specific
time within which completion was to take place, really and in
substance intended more than that it should take place within a
reasonable time. The principle is well expressed in what Lord
Redesdale said in his well-known judgment in Lennon v. Napper
[1802] 2 Sch. & Lef. 682, which was adopted by Knight-Bruce C
L.J. in Roberts v. Berry 3 D.M. & G. 284, at p. 289. The doctrine
laid down in these cases was again formulated by Lord Cairns in
Tilley v. Thomas L.R. 3 Ch. 61 and by the House of Lords in
the recent case of Stickney v. Keeble [1915] A.C. 386. Their
Lordships are of opinion that this is the doctrine which the
D
section of the Indian statute adopts and embodies in reference to
sales of land. It may be stated concisely in the language used by
Lord Cairns in Tilley v. Thomas L.R. 3 Ch. 61: ‘The construction
is and must be in equity the same as in a Court of Law’.

[52] Continuing at the same page and spilling over to p. 33, this E
was what Viscount Haldane said:
Their Lordships will add to the statement just quoted these
observations. The special jurisdiction of equity to disregard the
letter of the contract in ascertaining what the parties to the
contract are to be taken as having really and in substance F
intended as regards the time of its performance may be excluded
by any plainly expressed stipulation. But to have this effect the
language of the stipulation must show that the intention was to
make the rights of the parties depend on the observance of the
time limits prescribed in a fashion which is unmistakable. The G
language will have this effect if it plainly excludes the notion that
these time limits were of merely secondary importance in the
bargain, and that to disregard them would be to disregard nothing
that lay at its foundation. Prima facie, equity treats the importance
of such time limits as being subordinate to the main purpose of
the parties, and it will enjoin specific performance notwithstanding H
that from the point of view of a Court of law the contract has
not been literally performed by the plaintiff as regards the time
limit specified. This is merely an illustration of the general
principle of disregarding the letter for the substance which Courts
of Equity apply, when, for instance, they decree specific I
performance with compensation for a non-essential deficiency in
subject-matter.
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A But equity will not assist where there has been undue delay on
the part of one party to the contract, and the other has given him
reasonable notice that he must complete within a definite time.
Nor will it exercise its jurisdiction when the character of the
property or other circumstances would render such exercise likely
to result in injustice. In such cases the circumstances themselves,
B
apart from any question of expressed intention, exclude the
jurisdiction. Equity will further infer an intention that time should
be of the essence from what has passed between the parties prior
to the signing of the contract.

C [53] The same approach was adopted by Edmonds JC in Lai Yew


Seong v. Wong Chieu Gook [1913] FMS LR 125 when his Lordship
said at p. 128 of the report:
Section 55 of the Contract Enactment provides that whether time
is or is not to be regarded as of the essence of a contract
D depends on what was the intention of the parties at the time they
made the contract. This is an adoption of a principle of English
Law and having regard to the way the English Courts of Law
and Equity deal with covenants for payment of rent and re-entry
conditions in leases I am of opinion that time is not of the
E essence in this case.

[54] The headnote of the case of Muhammad Habidullah v. Bird


and Company [1922] AIR 178 PC, merits reproduction. There it
states as follows:
F The effect of s. 55 of the Act is, where the party having the
option elects not to avoid, to put the agreement after the original
date on the same footing as an agreement just before the original
date. Where a specific time is stated, then that substituted date
must hold. If there is a simple waiver of the right to extension of
the original time, then a reasonable time will be the proper time
G
for delivery. Section 55, para. 3 means that the promisee cannot
claim damages for non-performance at the original agreed time,
not that he cannot claim damages for non-performance at the
extended time. In an action for non-delivery or non-acceptance of
goods under a contract of sale the law does not take into account
H in estimating the damages anything that is accidental as between
the plaintiff and the defendant, as for instance, an intermediate
contract entered into with a third party for the purchase or sale
of goods.

[55] In S Ayadurai v. Lim Hye [1959] 1 LNS 89, Ismail Khan J


I
(as he then was) also adopted the view of the Privy Council in
Jamshed Khodaram Irani v. Burjorji Dhunjibhai (supra).
326 Current Law Journal [2010] 1 CLJ

[56] Ibrahim Manan J, in Ismail Haji Embong v. Lau Kong Han A


[1970] 1 LNS 40, and Visu Sinnadurai J, in Abdul Rahim Syed
Mohd v Ramakrishnan Kandasamy; Wan Ahmad Azlan Wan Majid
& Anor (Interveners) And Another Action [1996] 3 CLJ 393 dutifully
applied Jamshed Khodaram Irani v. Burjorji Dhunjibhai (supra) in
their judgments. B

[57] Salleh Abas FJ speaking for the then Federal Court in Sim
Chio Huat v. Wong Ted Fui [1983] 1 CLJ 178; [1983] CLJ (Rep)
363 had this to say of s. 56 of the Contracts Act 1950:
C
However, the rules contained in section 56 of the Contracts Act
are not different from the position arrived at in common law.
Yeow Kim Pong Realty Ltd. v. Ng Kim Pong [1962] M.L.J. 118,
126. The position is this: If in a contract in which time is of the
essence, a party fails to perform it by the stipulated time, the
innocent party has the right either to rescind the contract, or to D
treat it as still subsisting. If he treats it either expressly or by
conduct as still continuing, the contract exists but time ceases to
be of the essence and becomes at large. Consequently he cannot
claim the liquidated damages under the contract unless there is a
provision as to the extension of time. However, this cessation can
E
be revived and so time can be restored to be of the essence by
the innocent party serving a notice to the party in default giving
a new date of completion.

[58] Seah FJ, delivering the judgment of the then Federal Court
had this to say in Ganam Rajamany v. Somoo Sinnah [1984] 2 CLJ F
268; [1984] 1 CLJ (Rep) 123 in regard to time being the essence
of the contract:
In a contract for the sale of land the time fixed by the parties for
completion or performance is not to be strictly construed unless
it is the intention of the parties that time should be of the essence G
of the contract (see Jamshed v. Burjorji A.I.R. 1915 P.C. 83,
Stickney v. Keeble [1915] A.C. 386, Warren v. Tay Say Geok & Ors
[1965] 1 M.L.J. 44, and section 56(1) of the Contracts Act
1950]. Intention may either be express or implied and there are
three cases in which time is of the essence of the contract. H

(a) where the contract expressly states that time shall be of the
essence of the contract (Steedman v. Drinkle [1916] 1 A.C.
275 and Brickles v. Snell [1916] 2 A.C. 599).

(b) where time was not originally of the essence of the contract I
but has been made so by one party giving a notice to the
other. Such notice can only be given after the other party
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 327

A has been guilty of unreasonable delay and the time


mentioned in the notice must be reasonable (Stickney v.
Keeble (supra)).

(c) where from the nature of the property time may be


considered to be of the essence of the contract (Tilley v.
B Thomas [1867] 3 Ch App. 61).

These three principles are cited by the then Court of Appeal in


the case of Haji Hasnan v. Tan Ah Kian [1963] M.L.J. 175, 176.
In Yeow Kim Pong Realty Ltd. v. Ng Kim Pong [1962] M.L.J. 118,
120, the Privy Council said at page 120:
C
The question whether time is the essence of a contract is
one to be determined by ascertaining the real intention of
the parties. This is to be gathered by the examination
amongst other things of attendant circumstances.
D
[59] I have said that time was the essence of the contract, and
there was certainly delay on the part of the defendant to deliver
vacant possession of the property. The delay was far too
excessive and cannot be tolerated. When one considers s. 56(1)
of the Contracts Act 1950, it must be read together with s. 65
E
of the same Act which provides for the consequences of rescission
of a voidable contract. This was the approach adopted by Lord
Hailsham LC in Linggi Plantations Ltd v. Jagatheesan [1971] 1 LNS
66, PC. This was what the Lord Chancellor said:
F Section 65 of the Ordinance (now the Contracts Act 1950) and
section 64 of the Indian Act are to be found in that part of the
statute which deals with the performance of contract and, as has
been pointed out in several places, must be read closely in
connection with section 39 (the effect of refusal of the party to
G
perform the promise wholly) and section 56(1) (the effect of
failure of a party to perform in a fixed time a contract in which
time is essential).

[60] Since the defendant failed to deliver vacant possession within


the stipulated time frame, the plaintiff was entitled to elect to treat
H the contract as coming to an end. This was the approach adopted
by Lord Diplock in Eng Mee Yong & Ors v. V Letchumanan [1979]
1 LNS 18 and his Lordship said:
Time being of the essence of the provisions in the Sale
I
Agreement for payment of the purchase price, the failure of the
caveator to pay on the due date was a breach of condition which
the caveatees were entitled to elect to treat as bringing the
contract to an end.
328 Current Law Journal [2010] 1 CLJ

[61] Two letters were written by the plaintiff’s former solicitors to A


rescind the agreement. The first was on 27 December 2001. The
second was on 5 March 2003. That would be sufficient to bring
an end to the agreement because time was the essence of the
contract and the delay in delivering vacant possession of the
property amounted to a fundamental breach or breach going to B
the root of the contract which entitled the plaintiff, as the
innocent party, to rescind the agreement.

[62] The phrase “fundamental breach” has since been refined by


Lord Diplock in Photo Production Ltd v. Securicor Ltd [1980] AC C
827 at 849; [1980] 1 All ER 556 at 566, where his Lordship said
that:
... the failure by one party to perform a primary obligation has
the effect of depriving the other party of substantially the whole
benefit which it was the intention of the parties that he should D
obtain from the contract ... .

[63] Way back in 1838, the principles underlying both


fundamental term and fundamental breach were well illustrated by
Lord Abinger CB in the case of Chanter v. Hopkins [1838] 4 M & E
W 399 at 404, 150 E.R. 1484 at 1487 where his Lordship aptly
said: “... if a man offers to buy peas of another, and he sends him
beans, he does not perform his contract ... the contract is to sell
peas, and if he sends him any thing else in their stead, it is a non-
performance of it.” F

[64] The net result of finding that there has been either a breach
of a fundamental term or a fundamental breach is this. That the
innocent party or the party who is not in default may put an end
to the contract - in the sense that any obligations then
G
outstanding need no longer be performed by either party, and the
innocent party too may sue for damages for any loss suffered as a
result of the defaulting party’s non-performance. The plaintiff here
has done just that. Having rescinded the agreement, the plaintiff
filed the originating summons and sought for all those reliefs and
H
the learned High Court judge rightly granted those reliefs.

[65] The plaintiff was entitled to rely on s. 56(1) of the Contracts


Act 1950 in rescinding the agreement notwithstanding the absence
of an express provision in the agreement in regard to termination.
The rescission of the agreement by the plaintiff did not deprive I
the plaintiff of its entitlement to liquidated damages arising out of
the delay in delivering vacant possession of the property to the
plaintiff.
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A [66] My learned brother Raus Sharif, JCA referred to Chye Fook


& Anor v. Teh Teng Seng Realty Sdn Bhd [1988] 1 LNS 213, a
decision of Abdul Malek bin Ahmad J, (as he then was), and
Xavier Kang Yoon Mook v. Insun Development Sdn Bhd [1995]
2 CLJ 471, a decision of mine, and I, likewise, would like to refer
B to these two cases.

[67] The case of Chye Fook dealt with late completion of a


building where time was of the essence of the contract. And the
specific question which Abdul Malek bin Ahmad J, (as he then
C was) had to answer in that case pertained to the question of
whether the purchaser could sue for rescission on the agreement
when the house was not completed on the completion date. On
the options that were available to the purchaser, this was what
his Lordship said:
D
Section 56 of the Contracts Act 1950 states that a contract is
voidable at the option of the promisee if the intention of the
parties was that time should be the essence of the contract but if
it was otherwise the promisee is entitled to compensation from the
promisor for any loss occasioned to him by the latter’s failure to
E do the thing at or before the specified time. In this particular
instance, I was of the view that the first limb of the section
applied. Therefore, time was the essence of the contract and the
contract was voidable. Consequently, since the building was not
completed within 24 months from the date of the agreement, the
purchaser plaintiff had the option either to continue with the
F
contract or to rescind it.

[68] And in regard to liquidated damages, his Lordship had this


to say:

G
At this stage of the proceedings, this court was not asked to
determine whether the rescission would result in the plaintiffs not
being able to receive the liquidated damages but in passing I
would say that, as provided by s. 76 of the Contracts Act 1950,
a party who rightly rescinds a contract is entitled to compensation
for any damage which he has sustained through the non-fulfilment
H of the contract. I had in fact made it clear in my ruling that the
plaintiffs’ entitlement to liquidated damages if the developer failed
to complete within 24 months did not in any way take away the
rights of the purchaser to rescind the contract.

[69] While sitting on the High Court bench, in the case of Xavier
I
Kang Yoon Mook v. Insun Development Sdn Bhd (supra), I had a rare
opportunity to consider the same matter. In that case, by a sale
and purchase agreement (“agreement”), the purchaser purchased
330 Current Law Journal [2010] 1 CLJ

a house from the developer. The agreement adopted the version A


as found in Schedule “E” of the Housing Developers (Control and
Licensing) Regulations 1982. The developer failed to deliver vacant
possession of the house to the purchaser within the stipulated
time frame in the agreement. The purchaser sought to terminate
the agreement by sending letters of termination to the developer. B
The purchaser then filed an originating summons and prayed, inter
alia: (i) for a declaration that the agreement had been properly
terminated; (ii) that the developer must refund the money that had
been paid by the purchaser; and (iii) that the purchaser was
entitled to liquidated damages at the rate of 10% per annum of C
the purchase price from the date of delivery of vacant possession
until the date of termination of the agreement. The developer
conceded to prayers (i) and (ii), but argued that the liquidated
damages as sought for should be rejected. The developer also
argued that the right time for the purchaser to sue for liquidated D
damages would be when vacant possession was delivered because
by then the sum to be paid could be ascertained and became due
and that the limitation period would only be activated when
vacant possession was delivered. In regard to time being the
essence of the contract, this was what I said at p. 95 of the E
report:
Since time is the essence of the S & P agreement, it is
appropriate, at this juncture, to refer to s. 56(1) of the Contracts
Act 1950 which enacts, inter alia, that where time is the essence
F
of the contract, failure to perform within the stipulated time will
entitle the injured party to avoid the contract. But the injured party
has the right to elect not to avoid the contract but to insist on
performance and sue for damages.

[70] I too spoke of the rights of the purchaser in this way (see G
p. 96 of the report):
Applying the above principles to the present case, as time was
provided to be of the essence of the S & P agreement, the
stipulated time period within which the said house had to be
delivered to the plaintiff became an essential condition of the S & H
P agreement. The failure of the defendant to fulfil this condition
would entitle the plaintiff to have an option of treating the S & P
agreement either: (a) as having been repudiated and sue for
damages; or (b) as still continuing. The plaintiff rightly exercised
his option to proceed under (a). I
Berjaya Times Square Sdn Bhd
[2010] 1 CLJ v. M-Concept Sdn Bhd 331

A [71] Finally, on post-rescissionary damages, this was what I said:


In addition to that, an order for post-rescissionary damages in
favour of the plaintiff was also made, and these should be
assessed by the senior assistant registrar by virtue of O. 28 r. 4
of the Rules of the High Court 1980 (see also Tan Yang Long’s
B
case). Incidentally, the post-rescissionary damages (prayer 4 of
encl 3) relate to the compensation which the plaintiff sustained
through the non-fulfilment of the contract as envisaged under
s. 76 of the Contracts Act 1950.

C [72] Likewise here, the plaintiff was also entitled to post-


rescissionary damages.

[73] It must be recalled that the plaintiff made progressive


payments after receiving written notices from the defendant and
such progressive payments were made in compliance with cl. 3(1)
D
of the agreement. The plaintiff was obliged to made those
payments and if the plaintiff failed to make any progressive
payment, this would be construed as a breach that would entitle
the defendant to terminate the agreement in accordance with
cl. 5(1) of the agreement. Indeed that would be the stand of the
E
defendant as reflected in the case of Lim Yee Khei v. Berjaya Times
Square Sdn Bhd [2003] 1 CLJ 527.

[74] Finally, the regional economic crisis in 1997 and 1998


onwards cannot be an answer to the excessive long delay by the
F defendant in completing and delivering vacant possession of the
property. The agreement did not specify nor envisage a situation
where the defendant could delay the handing over of vacant
possession on account of the economic crisis. Yet, the defendant
now has the audacity to blame the long delay in handing over
G vacant possession entirely on the economic crisis ignoring
completely its own ability and obligation to complete the property
on the completion date or on the extended period or on or before
any other date as promised by the defendant. To go a step
further, even the economic crisis cannot excuse the plaintiff from
H paying the progressive payments under cl. 3(1) of the agreement.

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