The curious case of the Batu Pahat Mall

By Low Teck Kuan

Just two days after delivering a highly contentious decision in Dato’ Seri Anwar Ibrahim’s case, the Federal Court judges delivered a full judgment on the case of Dream Property Sdn Bhd v Atlas Housing Sdn Bhd, where both disputing parties had been locked in legal wrangles in the Court for almost ten years.

However, despite it being a lesser known case, this case has a much bigger impact to the public especially to property owners. Through this decision, any bona fide property owner who, during the course of concluding a sale and purchase transaction, allows the purchaser to enter into the property and carry out improvement works with the expectation that the purchaser will fulfill its payment obligations, may have to fork out more monies just to evict the purchaser in the event the transaction fell through and the purchaser refuses to leave the property.

Case background

For all Johor folks, this case is centered on the now famous Batu Pahat Mall, where the current landowner is Atlas Housing Sdn Bhd and the building owner being Dream Property Sdn Bhd owned by Tan Sri Tang Yeam Soon.

In year 2004, Atlas Housing entered into a sale and purchase agreement (SPA) to sell their 14.4 acres land to Dream Property at the price of RM 33.5 million to build the Batu Pahat Mall. However unlike most SPA, at the persuasion of Dream Property, Atlas Housing agreed to allow Dream Property to enter upon its land right after the 10% deposit had been paid to commence construction.

At the same time, as there were squatters and a primary school on the land, Atlas Housing was given 9 + 3 months to relocate them. Thereafter, there will be a joint inspection and handing over of the vacant possession of the land to Dream Property. The purchaser Dream Property is then given 4 + 2 months to pay the remaining 90% of the purchase price to conclude the transaction.

Despite Atlas Housing relocating both the squatters and the school on time, Dream Property had repeatedly failed to make good the balance purchase price even after reminders for payment and further extension were given in year 2006. The SPA was later automatically terminated and Atlas Housing proceeded to serve a notice to Dream Property to cease construction of the Batu Pahat Mall (which were only 50% constructed at that time). Atlas Housing also took the matter to the High Court to resolve the dispute.

However, instead of halting construction pending the resolution to their dispute, Dream Property rushed the construction and eventually completed the Mall 6 months later. After completing the construction, Dream Property even took a step further by creating third party rights in the Mall by selling part of the Mall to Pacific Hypermarket & Departmental Store Sdn Bhd, a subsidiary under The Store Group and it leasing the rest to tenants without the consents of the landowner. At this juncture, it is worth noting here that Pacific Hypermarket is related to Dream Property by virtue of having the same shareholders where Tan Sri Tang Yeam Soon are both Managing Director in The Store Group and Dream Property Sdn Bhd.

At the same time, Dream Property also challenged Atlas Housing’s claim at the High Court by disputing, amongst others, that the final date of payment was at a much later date. And when the matter was ordered to a full trial by the Federal Court two years later to determine the factual matrix of the case, the High Court in year 2011 decided for Atlas Housing. The High Court’s decisions were later affirmed by the Court of Appeal in year 2013.

The High Court and Court of Appeal’s decisions

The High Court found that Dream Property was indeed in breach of the SPA when it had failed to pay the balance purchase price on time. In addition, the High Court also found in evidence that Dream Property had acted in bad faith when it was served with a notice to cease construction. Instead of abiding by it, Dream Property had rushed the construction of the mall in order to ensure that the nature of the land is changed forever and thus making it difficult for Atlas Housing to get it returned to its original state. It was done mala fide, and undoubtly carried out to defeat Atlas Housing’s rights to its land and to ensure that it would not ever obtain repossession of its own property.

When the case was later appealed by Dream Property, the Court of Appeal affirmed the decision of the High Court. The appellate court further stated that the landowner Atlas Housing, does not have any obligations to file for an injunction in court to prevent Dream Property from continuing construction when dispute arose. Furthermore, there is no certainty that the court would have granted the injunction.

In addition, as the Power of Attorney granted to Dream Property by Atlas Housing only allowed Dream Property to enter into the land and commence construction, the Court of found that Dream Property had abused the Power of Attorney when it sold part of the Mall and leased the rest to third parties.

Both the High Court and Court of Appeal, after deciding that Dream Property had indeed acted in bad faith and breached the SPA, ordered that the land together with the fully functional Mall be returned to Atlas Housing, with Atlas Housing paying Dream Property all costs of constructing the Mall.

As Dream Property had took the risks to proceed with the construction despite there being a genuine dispute and Atlas Housing being the landowner at all times, the Court of Appeal decided that Dream Property is liable to the use and occupation of the land to the landlord and therefore it needs to account to all the profits it gained from the land to Atlas Housing.

Both Courts had ensured that the contract breaker Dream Property was not allowed to profit from its own breach. Apart from Atlas Housing forfeiting Dream Property’s 10% deposit under the SPA, Dream Property was only to be returned to its original financial position before it had entered into the SPA.

Unfortunately, what seemed to be a fair decision by both the High Court and the Court of Appeal was subsequently reversed by the Federal Court.

Federal Court’s decision

The Federal Court, despite completely agreeing that Dream Property was liable under the contract, unanimously reversed the decisions of both the lower Courts on the reliefs sought by Atlas Housing. In a 5-0 ruling led by the YA Tan Sri Raus Shariff, the Federal Court decided that Atlas Housing must pay for the market value of the Mall to the contract breaker Dream Property, minus the market value of the land without the Mall before the land can be returned to them.

Simply put, Atlas Housing as the landowner must pay for the value of improvement of the land despite Dream Property failing in their fundamental obligation as purchaser to pay the 90% balance purchase price! In addition, Dream Property is allowed to keep all the profits earned on Atlas Housing’s land without the need to account to the landowner even when the profits were made without the consent of the landowner.

The Federal Court justified this bizarre decision by relying mainly on the principle of unjust enrichment, and stated that it will be manifestly unjust for Atlas Housing to profit from Dream Property’s  “bona fide improvement and enhancement of the Land”. The Federal Court reasoned that Atlas Housing will be unjustly enriched as it did not obtain an injunction to stop Dream Property from constructing the Mall.

It further stated that Dream Property who had “lawfully constructed the Mall on the land” did not intend Atlas Housing to benefit from its effort, expertise and all at its own resources in establishing the Mall.

And as there is no defence available to extinguish or reduce Atlas’s liability to make restitution, it is only fair that Atlas Housing pays the current market value of the Mall excluding the market value of the land.

Erroneous judgment

This, without a doubt is a wrong decision as the Federal Court had not only failed to judicially appreciate the factual matrix of the case but also consider the commercial repercussions of this decision.

By ordering Atlas Housing to buy the Mall at market price, it is essentially allowing Dream Property who is the contract breaker to profit an amount to the tune of hundreds of millions in Ringgit when it had only paid RM 3.35 million as 10% of the purchase price.

The market value of the Mall is inextricably linked to the value of the land and its position in the geographical sense. It also factors on its future profits in the next 5 to 10 years (depending on negotiation) that a business owner would have made if he had not part with the business. Hence, by awarding market price of the Mall to be paid by Atlas Housing to Dream Property, the Federal Court had essentially forced Atlas Housing to pay a ridiculous sum of profits to Dream Property who had already profited tremendously on the land which it was never authorised to do so.

And what would the legal and public repercussions be? Firstly, it will allow future contract breakers to benefit from their wrongdoing. Secondly, it will also encourage irresponsible purchasers to take advantage of this legal loophole. As purchasers, if you managed to convince the landowner to allow you to enter into the property for improvement works first despite only paying 10% of the purchase price, you can comfortably sit and enjoy possession of the property even when you have not paid the balance purchase price.

This Federal Court decision will essentially allow contract breakers to possess the property until the owner pays them the value of improvement made on the property. Better, contract breakers can even sell or lease out part of the property without the authorisation of the landowner and keep these profits while the landowner take years of legal action just to evict them in the court of law!

As for property owners, they will also have the added responsibility to ensure that an injunction is filed against the purchasers if they ever took possession of their property, spent monies on them but refuses to pay the balance purchase price and leave. Serving a notice will clearly not be enough, as the Federal Court has decided that it is insufficient to prevent the purchasers from benefiting on your property.

Clearly, the Federal Court had failed to consider these pertinent consequences. How could the Federal Court not considered these possible repercussions? The Court had even failed to discuss the mala fide actions of Dream Property which were established through evidence in the High Court and highlighted by the Court of Appeal!

It was in evidence that Dream Property had rushed the construction of the mall despite there being genuine dispute to the land. It even took a step further by selling part of the Mall to 3^rd parties including one which is related to itself when it is not authorised to do so. The lack of consideration on these is perplexing to say the least.

Atlas Housing as the plaintiff to the case, had pleaded for the land to be returned after having Dream Property repeatedly failing to pay the balance purchase price. And to aid the Court in arriving at a just decision, even as a victim to the breach of contract, Atlas Housing had submitted to the Court that it was willing to pay for all construction costs to Dream Property even when it did not have to so. Atlas Housing was willing to return Dream Property to its original financial position to aid the Court in dispensing justice expeditiously and fairly.

Thus, in judicially failing to appreciate these facts, conducts and the motives of both parties equally, the Federal Court had unfortunately erred in deciding the relief for this case. 

Gerakan lawyer’s credibility is the problem, not the Bar Council

By Low Teck Kuan

I refer to the online exclusive piece of opinion written by Ivanpal Singh Grewal titled “The Bar Council’s credibility problem” published in The Star yesterday. Ivanpal is a graduate in law and also currently the Gerakan Selangor Youth Vice-Chairman and Secretary of the Gerakan Political Bureau.

In his article, Ivanpal made an attack against the Bar Council’s credibility by citing three points:

1. That in the course of his chambering when he was attending legal training organised by the Bar Council, the seminars were “peppered with critiques of the government and government policy”.
2. That the the Bar Council in an Extraordinary General Meeting (EGM) condemned the government’s handling of the Bersih 3.0 rally even before any official findings could be made by the Human Rights Commission of Malaysia (SUHAKAM) is wrong, as “no one should be pronounced as guilty of any wrongdoing before a full and proper investigation is made”.
3. And finally that the Bar Council is mischievous to insinuate that the executive had influenced the judiciary in Anwar’s because “Malaysia is a constitutional democracy that practices the doctrine of separation of powers”.

On the first point, similar to Ivanpal, I completed my legal education in year 2009, obtained my Certificate in Legal Practise in year 2010, and underwent chambering in year 2011. During the course of my pupillage, I had also diligently followed the legal training and seminars conducted by the Bar Council as part of my legal training.

Here, I wish to put my point across strongly that at no time did the Bar Council delivered the contents in their courses and seminars to put the government to shame. In fact, the courses were only designed to equip pupils on matters in relation to their legal practice which had nothing on the government’s actions and policies.

Even through checks with my peers who had all done chambering in years 2010, 2011 and 2012, none of them had found that the legal courses conducted by the Bar Council for pupils had any contents which criticises the government.

Hence, it is wrong and highly dishonest for Ivanpal to insinuate that the entire Bar Council and the relevant state bar committees have a hidden political agenda and are abusing the mandatory pupillage course to undermine the government.

Secondly, Ivanpal had claimed that it was wrong for the Bar Council in its EGM to condemn the government in its handling of Bersih 3.0 rally as the government is innocent until proven guilty. Now, Ivanpal should take note that the Bar Council committee themselves did not issue the criticism. Rather, it was done via a motion passed and voted overwhelmingly by lawyers.

The Extraordinary General Meeting of the Malaysian Bar (11 May 2012)

After the public rally, an EGM was called to discuss the motion tabled by fellow lawyers. And after two hours of discussion, of the total attendance, 939 lawyers voted in favour of the motion against 16 who disagreed, to condemn the police’s actions who had used excessive force against rallygoers including observers from the Bar Council.

In fact, the motion even stood the test of times as in April 2013, after conducting a public enquiry Suhakam found that the police had used excessive and disproportionate force against the rally participants.

The Bar Council takes no sides of any political divide. But in cases where any parties (be it government or not) breaches natural justice, the Bar Council, with the approval of majority lawyers as its members has an onerous duty to speak against it. On the Bersih 3.0 rally, the Bar had definitely stood up against the misconducts by the police.

Finally, Ivanpal naively (or perhaps deliberately) state that Malaysia as a constitutional democracy is currently practicing the doctrine of separation of powers where there are clear separation between the judiciary and the executive. Hence to insinuate that the executive influences the judiciary is plainly wrong.

But this statement does not hold water, nor it is reflected as such in our legal system. Under Judicial Appointments Act 2009, a Judicial Appointment Commission (JAC) was established to place the powers of appointment of judges under the thumbs of the head of executive aka the Prime Minister. Even in the JAC website, it is stated that one of the functions of the Commission is “to select suitably qualified persons who merit the appointment as judges of the superior court for the Prime Minister’s consideration”.

Based on this alone, clearly the Judiciary is not of the same level as the Executive but it is under the influence of the government instead. Hence, there are no separation of powers between the executive and the judiciary as judges actions are subjected to the scrutiny of the Prime Minister alone.

Justice Hishamudin’s snub to the Federal Court is one fine example. Despite being well known as the most respected serving judge, he was snubbed twice by the Prime Minister in the promotion of judges to the Federal Court for reasons that the Prime Minister himself knows best.

Hence, for Ivanpal to say otherwise, he has either misunderstood the legal system and the laws in place or had deliberately chose to close an eye to these laws. Coupled with his unsubstantiated insinuation against the Bar Council, unless he corrects it, Ivanpal has once again prove to the public that Gerakan has degenerated to the most unprincipled party in their history.