{"id":3560,"date":"2020-04-25T19:15:28","date_gmt":"2020-04-25T11:15:28","guid":{"rendered":"https:\/\/clement.geekwebz.com\/?p=3560"},"modified":"2025-10-01T17:03:07","modified_gmt":"2025-10-01T09:03:07","slug":"cubic-electronics-sdn-bhd-v-mars-telecommunication-sdn-bhd-2","status":"publish","type":"post","link":"https:\/\/clement.geekwebz.com\/index.php\/2020\/04\/25\/cubic-electronics-sdn-bhd-v-mars-telecommunication-sdn-bhd-2\/","title":{"rendered":"CUBIC ELECTRONICS SDN. BHD. (IN LIQUIDATION) V. MARS TELECOMMUNICATION SDN. BHD. [2019] 2 CLJ 723"},"content":{"rendered":"\t\t
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Brief Facts<\/h3>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Cubic Electronics Sdn. Bhd. (\u201cthe Defendant\u201d) was the owner of a piece of land on which stood a plant and machineries (\u201cthe Properties\u201d). Following the winding up of the Defendant, the Properties were put up for sale by way of an open tender exercise. Before the tender exercise could be carried out, the Defendant accepted Mars Telecommunication Sdn. Bhd.\u2019s (\u201cthe Plaintiff\u201d) offer to purchase the Properties for RM90 million and did not proceed with the tender exercise. An earnest deposit of RM1 million (\u201cthe first earnest deposit\u201d) was paid by the Plaintiff to the Defendant.<\/h5>
Despite being stipulated in the Information Memorandum that a sale and purchase agreement (\u201cSPA\u201d) shall be executed within 30 days, the Plaintiff requested for extensions of time on three different occasions. In return for the extensions granted, further earnest deposits were paid.<\/h5>
After the said extensions, finally on 25 January 2012, when the plaintiff through its solicitors requested for another extension until 24 February 2012 and sent a cheque worth RM6,000,000 to the defendant’s solicitors that was stated to be “towards account of the balance deposit payable” by the plaintiff, it was refused. On 30 January 2012, the defendant through its solicitors terminated the sale with the SPA not executed by the plaintiff and returned the plaintiff’s cheque.<\/h5>
The defendant also wrote to inform the plaintiff that the all earnest deposits in the total sum of RM3,040,000 paid were forfeited. The Properties were subsequently sold to a third party by way of an open tender.<\/h5>
The plaintiff initiated a civil action seeking for, among others, a declaration that termination of the sale was wrongful and invalid. In addition, the plaintiff sought for the return of its deposit money and interests of RM3,040,000 or, alternatively, RM2,040,000 less the first deposit of RM1,000,000.The High Court dismissed the Plaintiff\u2019s claim.<\/h5>
On appeal, the Court of Appeal ruled that the forfeiture of the earnest deposit sums and the interest was impermissible but allowed the Defendant to forfeit the first earnest deposit relying on the case of Selva Kumar Murugiah v. Thiagarajah Retnasamy [1995] 2 CLJ 374 and Johor Coastal Development Sdn. Bhd. v Constrajaya Sdn. Bhd. [2009] 4 CLJ 569 and held that there was no evidence to show that the impugned amount represented the damage suffered by the Defendant as a result of the Plaintiff\u2019s breach. The Court of Appeal also came to the view that the amount forfeited was not a genuine pre-estimate of loss as required under Section 75 Contract Act 1950 (\u201cs.75 CA 1950\u201d).<\/h5>
The Defendant filed motion for leave to appeal to the Federal Court and it was allowed. The position of law under Selva Kumar Murugiah v. Thiagarajah Retnasamy [1995] 2 CLJ 374 and Johor Coastal Development Sdn. Bhd. v Constrajaya Sdn. Bhd. [2009] 4 CLJ 569 on forfeiture of deposit is reviewed.<\/h5>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Questions of Law<\/h3>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Where, in a sale and purchase of property, where terms and conditions of the sale and purchase agreement (SPA) have been agreed and a date is fixed for the execution of the SPA, whether any additional deposit paid for the extension of time for completion is equally subject to forfeiture.<\/h5>
Whether a purchaser who has agreed and willingly paid an interest in consideration of an extension of time be entitled to claim a refund of the same in the event he defaults in executing the SPA and paying the balance deposit on the due date.<\/h5><\/div><\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Decision<\/h3>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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In answering the leave questions, the Federal Court in effect reviewed the existing position of law on damages clauses found in a contract.<\/h5>
Following the principles from Selva Kumar Murugiah v. Thiagarajah Retnasamy [1995] 2 CLJ 374, the local position has always been that an innocent party in a contract that has been breached, cannot recover simpliciter the sum fixed in a damages clause whether as penalty or liquidated damages. He must prove the actual damage he has suffered unless his case falls under the limited situation where it is difficult to assess actual damage or loss.
In respect of this position of law, the Federal Court disagreed and ruled that there is no necessity for proof of actual loss or damage in every case where the innocent party seeks to enforce a damages clause.<\/h5>
It is opined that Selva Kumar (supra) and Johor Coastal (supra) should not be interpreted (as what the subsequent decisions since then have done) as imposing a legal straightjacket in which proof of actual loss is the sole conclusive determinant of reasonable compensation. Reasonable compensation is not confined to actual loss, although evidence of that may be a useful starting point.
On issue of burden of proof, it is ruled that the initial onus lies on the party seeking to enforce a clause under s. 75 of the Act to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach.<\/h5>
Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven, subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any.<\/h5>
If there is a dispute as to what constitutes reasonable compensation, the burden of proof falls on the defaulting party to show that the damages clause is unreasonable or to demonstrate from available evidence and under such circumstances what comprises reasonable compensation caused by the breach of contract.<\/h5>
Failing to discharge that burden, the compensation stipulated in the contract ought to be upheld.<\/h5>
Premising on the above, the first leave question is answered in the affirmative in that in a sale and purchase of land where the terms and conditions have been agreed upon and a date fixed for execution, any additional deposit paid for the extension of time for completion is subject to forfeiture if it is consistent with s. 75 of the Act, that is, if it is a reasonable amount. As such, the total sum of RM2 million being the additional earnest deposits paid by the plaintiff is therefore forfeitable by the defendant. Second leave question is answered in the negative and the payment of RM40,000.00 interest is not refundable.<\/h5><\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

Brief Facts Cubic Electronics Sdn. Bhd. (\u201cthe Defendant\u201d) was the owner of a piece of land on which stood a plant and machineries (\u201cthe Properties\u201d). Following the winding up of the Defendant, the Properties were put up for sale by way of an open tender exercise. Before the tender exercise could be carried out, the […]<\/p>\n","protected":false},"author":1,"featured_media":4154,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45,44],"tags":[42,41],"class_list":["post-3560","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-case-summary","category-law","tag-case-summary","tag-law"],"_links":{"self":[{"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/posts\/3560","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/comments?post=3560"}],"version-history":[{"count":6,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/posts\/3560\/revisions"}],"predecessor-version":[{"id":3611,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/posts\/3560\/revisions\/3611"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/media\/4154"}],"wp:attachment":[{"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/media?parent=3560"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/categories?post=3560"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/clement.geekwebz.com\/index.php\/wp-json\/wp\/v2\/tags?post=3560"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}