LIM AH MOI V. AMS PERIASAMY SUPPIAH PILLAY

[Appellant's appeal dismissed.]
[Rayuan perayu ditolak.]
 

Gopal Sri Ram JCA:

As long ago as February 1983, the appellant and one Tan Hee Thai entered into a sale and purchase agreement in respect of a piece of land in Tapah of which the respondent is the registered proprietor. Soon after the execution of this agreement on 8 June 1984, the appellant entered a caveat against the title to the land to protect his interest pending completion. It is what the profession calls a conveyancing caveat. Such a caveat is entered, not in anticipation of any litigation, but merely pending conveyance and transfer of the property which forms the subject matter of the sale.

On 31 July 1986, the vendor, Tan Hee Thai, through his solicitors, wrote to the appellant's solicitors informing them that the area of the land available for transfer was not 5.5 acres as stated in the sale and purchase agreement but only 4.28 acres. The appellant took exception to this information. On 8 August 1986, his solicitors responded by a letter the contents of which are so important that I consider their reproduction here vital. This is what the letter says:

Dear Sirs,

We refer to your letter dated 31st July, 1986.
 

Our client has instructed us to inform you that he expressly by the agreement purchased a piece of land measuring 5.5 acres. Our client needs for his purposes a minimum of 5.5 acres and not 4.28 acres as now offered by your clients in clear breach of the agreement. As the other piece of 1.22 acres is in a different lot our client is definitely not agreeable to take two pieces in different lots.

As you state our client agreed to purchase 5.5. acres and not 4.28 acres in one lot and 1.22 acres in another.

As such our client is not interested to take the 4.28 acres offered by your client in breach of the agreement and there is no question at all of your client forfeiting the RM10,000.
 

Instead our client reserves the right to sue your client for breach of contract and claim damages.

Your client is to take this as notice that if the said sum together with interest is not refunded within 14 days from date hereof we have instructions to commence legal proceedings against your client without any further reference.

On 29 August 1986, the vendor's solicitors replied as follows:
 

Messrs.

Bachan & Kartar Advocates and Solicitors 2nd Floor, 31, Station Road 30000 Ipoh

Re: Tapah Estate H.S (D) B.P. 56/81 Lot 6399 in the Mukim District of Batang Padang

We are pleased to inform you that our client has completed arrangements with A.M.S. Periasamy son of Suppiah Pillay to transfer direct to you the 5.5 acres of land which they have agreed to sell to you under the relevant agreement of sale and purchase.

In view of this, our client is now in a position to deliver to your client a valid and registrable transfer in respect of the sale to your client of the 5.5 acres of land.
 

Our client now instructs us to and we do hereby give you notice to pay up to us as solicitors for our client the balance of the purchase price which has been deposited by your client to you since 3rd August 1983.

If your client fails to pay up the balance of the purchase price within fourteen (14) days of the receipt of this letter, our client will have no alternative but to forfeit the deposit of RM10,000 paid under the relevant Agreement of Sale and Purchase.

On 28 April 1989, the appellant obtained an ex parte order extending the caveat pursuant to the provision of s. 326(2) of the National Land Code ('the Code'). Nothing else happened until 28 August 1995 when the appellant filed his writ for specific performance and ancillary relief.

On 29 September 1995, the respondent, as registered proprietor, applied to remove the caveat. On 30 August 1996, the learned Judge who heard the application made an order in terms of it and directed the removal of the caveat.

His reasons appear sufficiently in his written judgment and may be summarised as follows:

(1) The appellant had no caveatable interest in the land having given up his rights by electing to rescind the sale and purchase agreement by way of his letter dated 8 August 1986;

(2) The appellant had not acted timeously in enforcing his claim by way of an action in Court.

I will take each of these grounds, and the arguments addressed in respect of each of them, separately.

At the heart of this appeal lies the question, whether the appellant has a claim to the title of the land in question. The learned Judge answered this question against the appellant. He held that the effect of the appellant's letter of 8 August 1986 was an unequivocal abandonment of any interest in the land. Having read that letter very carefully, I must express my agreement with the conclusion reached by the learned Judge on the point.

When the vendor's solicitors stated in their letter of 31 July 1986 their client's inability to convey 5.5 acres of the land to the appellant, there was a clear breach of the terms of the sale and purchase agreement. Once he received that intimation, the appellant had at least two alternatives open to him. These alternatives appear in s. 40 of the Contracts Act 1950 which is in the following terms:
 

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

The other way of stating the rule is this. An innocent party against whom a contract is repudiated may either accept the repudiation and sue for damages or he may treat the contract as continuing, and sue for specific performance.

There is, in my judgment, yet a third option available to the innocent party. It is the common law right of rescission, akin to but much narrower than its equitable counterpart. In the present case the appellant clearly made his election to rescind the sale and purchase agreement. Hence his demand for the return of the RM10,000. What he was in fact asking was a restoration of the status quo ante.

Having made this choice, he is bound by it. That much is clear from the judgment of Mason J (later CJ Australia) in Sargent v. A.S.L. Developments Ltd. [1974] 131 CLR 634, 655 where he said:
 

It will make for greater certainty, therefore, if the present cases are regarded as cases of election. A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, ie, when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract.

Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted (R. v. Paulson [1921] 1 AC 271, 284; Tropical Traders Ltd. v. Goonan [1964] 111 CLR 41, 55). No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations.

Later, his Honour said (at p. 658):

For my part this proposition correctly states the law in its application to contracts as well as interests in property. If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to
 

For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected.

In my judgment, the principles stated by Mason J apply with full force to the appellant's case. Having taken the stand that he did by his letter of 8 August 1986, he now cannot detract. His claim, if any, is confined to the recovery of the deposit he had paid and not to the land he had agreed to purchase. The learned Judge was therefore quite right in holding that there was no caveatable interest within s. 323 of the Code.

With that, I now turn to the second ground.

It is well settled that a caveat acts as a statutory injunction which fetters a registered proprietor from dealing with his property and exercising all the rights conferred upon him by the Code. Because of its far reaching effect, it is vital that claims made by a caveator are enforced by action without undue delay.

Lord Diplock in Eng Mee Yong & Ors. V. Letchumanan [1979] 1 LNS 18 put the matter in this way:

... once the caveatee has met the first requirement of satisfying the Court that the claim on which his caveat is based does raise a serious question to be tried, the balance of convenience would in the normal way and in the absence of any special circumstances be in favour of leaving the caveat in existence until proceedings brought and prosecuted timeously by the caveator, for specific performance of the contract of sale which he alleges had been tried. (Emphasis added.)

An illustration of the application of this principle is to be found in the case of Teo Ai Choo v. Leong Sze Hian [1982] 2 MLJ 12 where Sinnathuray J directed the removal of a caveat because of a delay of eleven months during which period no action had been filed. I emphasise the fact that delay was the sole reason for the removal of caveat in that case.

Mr. Bachan Singh has argued that the delay in the present case was only a few months because time began to run only after his client discovered from a reading of the vendor's affidavit in the present case that the land had been resold to a third party. With respect, I am unable to agree with Counsel. Once the vendor had signified on 31 July 1986 that he was not in a position to honour the agreement, the appellant's rights crystallised in the sense of the election he was entitled to make. A reasonable man reading the appellant's letter of 8 August 1986, to which reference has already been made, would be left with the impression that the appellant was no longer interested in the land and that the vendor was at liberty to dispose of it as he thought fit. Time should therefore, be determined from 8 August 1986 and not the later date suggested by Counsel.

Whether a caveat ought to remain or ought to be removed involves the exercise of discretion by the Judge hearing an application under s. 327 of the Code. Particular attention should be paid to the words "may make such order on the application as it may think just" that appear in the section. These words make it clear that a Court hearing an application to remove a caveat is very much concerned with the justice of the case. The process involves a balancing of competing considerations and an evaluation of the evidence and, the facts of each particular case until the balance conclusively shifts in one direction or the other.

After hearing the appellant's argument, I am left unconvinced that discretion was wrongly exercised by the Judge in this case. In all appeals against exercise of discretion, the initial role of this Court is one of review only. The burden lies upon the appellant to demonstrate convincingly that the Judge to whom the law entrusts the primary exercise of the discretion has erred in principle or has taken into account or failed to take into account relevant considerations or has asked himself the wrong question.

This burden, the appellant before us, has, in my judgment, failed to discharge. This Court has therefore no independent discretion to exercise. Even if I, sitting as the trial Judge may have exercised discretion differently than has been done in the present instance, yet I will not be entitled to intervene. But, as it happens, in the present case, I am entirely satisfied the learned Judge correctly exercised his discretion.

For these reasons, I would dismiss the appeal with costs and affirm the order of the learned Judge.

Abu Mansor Ali JCA:

I agree with the judgment of my learned brother Gopal Sri Ram, JCA. For the reasons given by him, I too would dismiss this appeal.

Denis Ong JCA:

I concur and have nothing to add.