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MALAYSIAN JUDGMENTS & RULINGS

[2018] MYCA 95 ENGLISH

Dharijthullah Khan Bin M Kamal v Soori Themed A/L Appanah
Suit Number: Civil Appeal No. P-02(NCVC)(W)-1986-10/2016 

Contracts & commercial – Lease agreement – Breach of contract – Claim for rentals, return or value of the premises

Litigation & court procedure – Limitation period – Whether the claim time-barred – Section 6(1) of the Limitation Act 1953

Litigation & court procedure – Doctrine of Laches – Whether the claim barred under section 32 of the Limitation Act 1953

 JUDGMENT

Introduction

[1] This is an appeal against the dismissal of the appellant/ plaintiff’s claim for inter alia rentals of premises rented to the respondent/ defendant, return of the premises or value of the premises. After hearing learned counsel, we reserved our decision. Upon careful consideration of the records of appeal, the ground of judgment and the respective submissions, this is our decision.

Factual background

[2] The appellant and his late father were joint registered owners of premises at No. 27, Jalan Utama, Georgetown, Penang [said premises]. The said premises was used as a restaurant by the name of “Barkath Restaurant”. By an “Agreement of Lease” dated 11.2.2002 made between the appellant and his father on the one part, with the respondent on the other, it was agreed that the said premises would be leased to the respondent for inter alia a period of three years commencing 1.3.2002 to 28.2.2005 at a monthly rental of RM2,500.00 per month, payable in advance on or before the 1st day of each and every month [the said lease]. The said premises came with a list of furniture and fittings which was attached to the said lease.

[3] The appellant claimed that at the time of the making of the said lease, the parties orally agreed that since the said premises were charged to United Overseas Bank (M) Bhd in respect of loan facilities taken by the appellant, that because the appellant was moving to Kuala Lumpur and as his late father was then too old to personally collect the monthly rentals, the respondent had agreed to pay the monthly rentals directly into the bank account of the appellant. The fixed loan and revolving credit facilities were taken out in the name of Barkath Restaurant with the appellant and a few others standing as guarantors.

[4] The appellant claimed that the respondent only paid the first month’s rental into the account and thereafter failed to pay the rentals as agreed. As a result of the respondent’s failure to pay the monthly rentals, the bank foreclosed on the said charge. The said premises were auctioned off on 1.9.2004 and the respondent was the successful bidder.

[5] The appellant claimed that he was unaware of the foreclosure proceedings as all related correspondence and notices were served or sent to the said premises, and the respondent never forwarded or notified him of the same. He only found out about the foreclosure and the auction when he went to the bank to inquire about the status of his loan and for bank statements.

[6] The appellant claimed that the respondent’s purchase and possession of the said premises was inter alia by way of wrongful and illegal means, with bad faith, criminal intent and that the respondent had cheated the appellant. The appellant sued the respondent in January 2015. Amongst the reliefs claimed were rentals for the whole period of the agreed lease, double rentals and a return of the premises to the appellant and/or the market value of the said premises at the material time. The appellant entered a caveat on the said premises.

[7] While admitting the existence of the said lease, the respondent denied the existence of the oral agreement. The respondent claimed that the monthly rentals were collected by either the appellant or his father; that he was not aware of the charge until he saw the foreclosure notices attached to the said premises, that all notices and letters were collected by the appellant and his father, and that he had informed the appellant of the auction. According to the respondent, he was forced to buy the premises because he had spent a substantial amount on the said premises. The respondent further pleaded that the claim was time-barred under section 6(1) of the Limitation Act 1953 and/or by the doctrine of laches. In addition, the respondent counterclaimed for a revocation of the appellant’s caveat and for losses including the loss of the RM2,040,000.00 loan that was withdrawn by the bank.

[8] The counterclaim was disputed with the appellant relying on the respondent’s allegedly wrongful deeds as alluded to earlier. The appellant countered that his claim is not time-barred as it is filed within the period of 12 years.

Decision of the High Court

[9] The High Court dismissed the claim finding that because neither party was able to adduce documentary evidence on the payment of rental, the Court will rely on the said lease for the agreed terms. As there were no terms on such payment, the learned Judge found that the appellant had therefore failed to prove his claim. The learned Judge found that, if it was true that the there was an arrangement to pay the rentals directly into the bank account, it was only the appellant’s duty and responsibility to have, from time to time, checked with the bank on whether the rentals were being paid into the bank account. This was reasonable since there was no evidence of any close relationship between the parties for the appellant to have trusted the respondent. Had the appellant checked regularly with the bank, he could have avoided the foreclosure.

[10] The learned Judge further found inter alia that there was no duty on the respondent to avoid auction of the said premises; and that the respondent had properly participated in the foreclosure proceedings. The learned Judge did not find any evidence of fraud or cheating by the respondent when he took part in the foreclosure proceedings.

[11] The learned Judge also found the claim time-barred under section 6(1) of the Limitation Act 1953; or barred by the doctrine of laches.

[12] The counterclaim was allowed, but only in relation to the revocation of the caveat. The claim for damages was disallowed.

[13] The appellant appealed. There is no cross-appeal or separate appeal by the respondent. At the appeal before us, the appellant appeared in person.

Decision of the Court of Appeal

[14] We will deal with the limitation and laches points first.

[15] The learned Judge understood the appellant’s claim as one founded in contract, that the appellant’s claim was founded in the lease agreement. Such a claim must be filed within 6 years from the breach of contract under section 6(1) of the Limitation Act 1953. Since the appellant’s claim is for amongst others, rentals and double rentals, the claim filed in 2015 was obviously time-barred. The learned Judge further found the claim barred by laches under section 32 of the Limitation Act 1953. The learned Judge further found that the claim filed more than 10 years after the right to claim was barred by the doctrine of laches.

[16] The appellant’s response is that there has been fraud practised here by the respondent. Where there is fraud, limitation does not run until the fraud is discovered-see section 29 of the Limitation Act.

[17] We find great difficulty in following this argument. Even if there is fraud, it is not borne out by the pleaded case, to which all parties are bound. Neither is it borne out by the facts. If there was any fraud, which we agree with the Learned Judge there is none, it is one which is easily discovered as the underlying arrangements between the parties is in the lease agreement. It was for a period of three years from 1st March 2002 and expiring 28th February 2005. There is no provision in the lease agreement for an extension or a renewal of the lease. The appellant testified that the lease was not renewed.

[18] Since the lease is for a fixed term, as pleaded and as appearing in the record of appeal [page 94], two things would have taken place in the usual course of things. First, the moment the lease expired on 28.2.2005, there would be the matter of extension or renewal. Second, absent any renewal or extension, the occupation and use of the said premises reverts to the appellant. The appellant has a right of re-entry.

[19] The appellant had not only pleaded that the lease was for the period of three years, the appellant testified that it was not renewed. Consequently, upon the expiration of the lease, the appellant should have and would be expected to take back possession of the said premises. This would be in February 2005.

[20] At that point in time, the appellant would have learnt that the said premises had been auctioned off and bought by the respondent. At that point in time, the appellant would have seen the renovations and new fittings brought in by the respondent. At that point in time, it would be reasonable to expect that the appellant would be asking questions, especially about the rentals.

[21] The appellant offered evidence of ill-health to account for his inaction. That was however, for a period in 2008. There is no evidence of what happened immediately after 2005, or between 2005 and 2008. Bearing in mind that the foreclosure occurred on 1.9.2004, the appellant would have learnt about the foreclosure.

[22] There is no explanation as to what the appellant did; certainly not in the pleaded case. Thus, the appellant’s reliance on section 29 and the allegation of fraud is inherently improbable given there is no continuance in the relationship once the lease expired. By 28.2.2005, the appellant had a right of re-entry upon expiration of the lease. At that point in time, any concerns about the payment or non-payment of rentals could have been addressed. On the facts, the appellant’s claim is clearly time-barred.

[23] During the hearing of the appeal, it occurred to us that there may be some room for considering submissions that there exists a constructive trust. As explained in Tay Choo Foo @ Tay Chiew Foo v Tengku Mohd Saad @ Tengku Arifaad bin Tengku Mansur & Ors (2009) 1 MLJ 289, a constructive trust "...is simply a relationship created by equity in the interest of conscience". According to Snell's Equity (26th Ed) (at page 201), a constructive trust is a ‘trust which is imposed by equity in order to satisfy the demands of justice and good conscience, without reference to any express or presumed intention of the parties'. In The Law of Trusts by JG Riddall (3rd Ed) (at page 359) the learned author’s views are as follows:

“The constructive trust is a remedial device that is employed to correct unjust enrichment. It has the effect of taking title to property from one person whose title unjustly enriches him, and transferring it to another who has been unjustly deprived of it..."

[24] However, upon a careful perusal of the pleaded claim and in the circumstances as described above, there is no basis in law and on the facts, either to warrant or justify the existence of a constructive trust.

[25] For all the reasons set out, the appeal is therefore dismissed.

Dated: 8 March 2018

Signed

MARY LIM THIAM SUAN
Judge
Court of Appeal, Putrajaya
Malaysia

COUNSEL

The Appellant in person. Dharijthullah Khan bin M. Kamal, Blok E-4-5, Taman Nusantara, Jalan Makloom, Georgetown, 10150 Pulau Pinang

For the Respondent: Amareson a/l K. Velu, Amareson & Meera, Tingkat 1, No. 10-A, Lebuh King, 10200 Pulau Pinang

Legislation referred to:

Limitation Act 1953, Sections 6(1), 29, 32

Judgments referred to:

Tay Choo Foo @ Tay Chiew Foo v Tengku Mohd Saad @ Tengku Arifaad bin Tengku Mansur & Ors [2009] 1 MLJ 289

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