MBf Property Services Sdn Bhd & Anor v Balasubramaniam a/l K Arumugam

Court of Appeal
 Civil Appeal No W-02-714-97

Gopal Sri Ram, NH Chan, Ahmad Fairuz Sheikh Abdul Halim, JJCA

January 25, 2000

CONTRACT: Agreements - Whether formed part of the same transaction - Whether should be read together - Building (Federal Territory of Kuala Lumpur) By-Laws 1985

Words and Phrases: Meaning of "Certificate of Fitness" - Building (Federal Territory of Kuala Lumpur) By-laws 1985

The respondent entered into an agreement (the sale and purchase agreement) with a housing developer, Kesturi Sakti Sdn Bhd, for the purchase of a property. In order to finance the purchase, the respondent applied for a loan from the second appellant, MBf Properties Berhad. By a letter, the second appellant offered the respondent a housing loan, which the respondent accepted. Clause 8 of the letter stated that "interest on the loan shall be payable monthly until the issuance of the Certificate of Fitness for Occupation" (CF),  and that the first instalment would be payable after the date of the issuance of CF. It was also stated in the same clause that the second appellant reserved the right to effect the commencement of the monthly instalment at its absolute discretion.

The respondent then entered into an agreement with the first appellant, MBf Property Services Sdn Bhd. This agreement was effectively an undertaking by the first appellant to pay all interest accrued on the respondent's loan until the issuance of the CF.

The respondent subsequently applied for a declaration that there was no necessity for any payments to be made to the second appellant until the issuance of the CF. The term "Certificate of Fitness" was not defined in the agreements, so, the learned Judge, in granting an order in terms of the application, relied on the Building (Federal Territory of Kuala Lumpur) By-Laws 1985 in interpreting that term. This is the appellants' appeal against that decision.

Issue(s)

1. Whether the second appellant was entitled to call upon the respondent to commence repayment of the loan without taking into account the issuance of the CF.

2. Whether the learned Judge erred in her decision.

Held

1. The three agreements must be read together as they formed part of the same transaction. The second appellant could not rely on Clause 8 of the letter of offer, without taking into account the sale and purchase agreement and the agreement between the respondent and the first appellant. Therefore, the second appellant was not entitled to call upon the respondent to commence repayment of the loan without taking into account the issuance of the CF.

2. The learned Judge reached her decision based on well-settled canons of construction and hence did not commit any error in reaching her decision.

Appeal dismissed with costs: Order of High Court Judge affirmed

Case(s) referred to by the court

IDC Group Ltd v Clark [1992] 2 EGLR 1184 (ref)

Manks v Whitely [1912] 1 Ch 735 (foll)

Legislation considered

Building (Federal Territory of Kuala Lumpur) By-laws 1985

Housing Developers (Control & Licensing) Regulations 1989

Gopal Sri Ram, JCA

This appeal concerns the construction of an agreement entered into between the first appellant and the respondent. Briefly, the background against which this appeal rests is as follows.

On July 23, 1993, the respondent entered into a sale and purchase agreement with a housing developer called Kesturi Sakti Sdn Bhd to purchase a property. It was an agreement in the statutory form prescribed by the Housing Developers (Control & Licensing) Regulations 1989.

In order to finance the purchase of the property under the sale and purchase agreement, the respondent applied for and obtained a loan from the second appellant. In its letter of offer of a housing loan dated August 25, 1993 the second appellant inserted a provision which reads as follows:

"Clause 8"

Repayment: Interest on the loan shall be payable monthly until the issuance of Certificate of Fitness (CF). Upon the issuance of CF, repayment of this loan will be by 132 equal monthly instalments of principal and interest of Malaysian Ringgit RM2,628.76, the first instalment to be made the first day each month following next after the date of issuance of Certificate of Fitness (CF). However, MBf Berhad reserve the right to effect the commencement of the monthly instalment of principal and interest at our absolute discretion from time to time."

This offer was accepted by the respondent on September 2, 1993. Contemporaneously with the signing of the sale and purchase agreement, the first appellant and the respondent entered into an agreement which is evidenced in an undated letter of the first appellant. Shorn of its formal parts this is what it says:

"We refer to your purchase of the above unit.

We are pleased to inform you that in consideration of you purchasing the said unit we agree to pay all the interest accrued on your loan disbursed to pay for the purchase price of the above unit during the period of construction of the unit and until your loan is fully drawdown with the Certificate of Fitness being issued. The agreement to pay is not assignable by you and subject to you complying with the terms and conditions of your Loan Agreement with your end financier.

The payment of the interest will be made by us directly to your end financier with whom we shall be making arrangement to pay with your consent. Your end financier will keep you informed of the payment.

Please note that our agreement to pay interest is also subject to that the interest rate from your end financier for the loan must not be more than the prevailing rate of interest imposed by MBf Finance Berhad for this type of unit. If the interest rate of your loan is higher than the rate of MBf Finance Berhad, you will have to bear the difference of any excess.

Kindly signify your acceptance of our  agreement to pay the interest and your consent to communication with your end financier."

This document is signed by the first appellant as the attorney for Kesturi Sakti Sdn Bhd. It shows us having been copied to "End Financier" who in the present instance, counsel for the appellant concedes, is the second appellant.

Later, on April 29.1997, the respondent took out an originating summons against the appellants, asking for a declaration that he need not make any payments to the second appellant until the issuance of the certificate of fitness for occupation. The learned Judge granted an order in terms of that application.

Before us, Mr Kelvin Kong for the appellant, submitted that the learned Judge erred by failing to take account of Clause 8 of the second appellant's letter of offer. He argued that on paper construction of the terms of the said letter, which was issued by the second appellant and accepted by the respondent, the second appellant reserved the right to call upon the respondent to commence repayment of the loan without taking into account the issuance of the certificate of fitness for occupation.

With respect, we cannot accept this submission. The three documents; the sale and purchase agreement, the agreement with the first appellant and the loan agreement with the second appellant, must be read together as they form part of the same transaction. This is in accordance with settled principles of law.

Thus, in Manks v Whitely [1912] 1 CH735, Fletcher Moulton LJ, said (at p 754):

"[W] here several deeds form part of one transaction and are contemporaneously executed they have the same effect for all purposes such as are relevant to this case as if they were one deed. Each is executed on the faith of all the others being executed also and is intended to speak only as part of the one transaction, and if one is seeking to make equities apply to the parties they must be equities arising out of the transaction as a whole. It is not open to third parties to treat each one of them as a deed representing a separate and independent transaction for the purpose of claiming rights which would only accrue to them if the transaction represented by the selected deed was operative separately. In other words, the principles of equity deal with the substance of things, which in such case is the whole transaction, and not with unrealities such as the hypothetical operation of one of the deeds by itself without the others." (emphasis added.)

When the three documents are read as a whole, their effect is this. In the first place, the respondent shall purchase the property from the developer at a specified price and terms provided under the sale and purchase agreement. Thereafter, the first appellant shall keep the respondent indemnified and harmless in respect of any monetary payments due to the second appellant until the certificate of fitness of occupation is issued. Secondly, the second appellant will lend money to the respondent to pay for the purchase upon the mutual covenants contained in the its letter of offer subject to the condition that the interest will be paid by the first appellant during the relevant period.

Now it is quite clear that the undated letter of the first appellant provides no definition of the expression "Certificate of Fitness". It merely uses that term. The learned Judge relied on the Building (Federal Territory of Kuala Lumpur) By-Laws 1985 as an aid to interpret the meaning of that phrase. "Certificate of Fitness" under the by-laws means a certificate which would entitle the respondent to occupy the subject property.

We are unable to disagree with the reasoning of the learned Judge. In the absence of language which denotes the presence of a contrary intention, it may be presumed that the parties used the term "Certificate of Fitness" as employed by the by-laws. Once this conclusion is reached, no fault may be placed upon the reasoning adopted by the learned Judge. She merely construed the meaning according to well-settled canons of construction. (See, for example Nourse LJ, in IDC Group Ltd v Clark [1992] 2 EGLF 184). She did not commit any error. We are unanimous in our agreement with her judgment.

We would therefore dismiss the appeal. The appellants must pay the cost of this appeal. The order of the Judge is affirmed. The deposit in court is to be paid to the respondent to account of his taxed costs.

Solicitors

Kelvin Kong (Heng & Mogan) for Appellant

V Rajadevan and Joseph Mathews (Rajadevan & Associates) for Respondent

Judgment received on March 8, 2000