Vendor should not sit on defective security documents

This is a case where the Court of Appeal dismissed the Vendors’ claim on the forfeiture of the deposit sum and a claim for late payment interest despite the extended completion date has lapsed. The Court arrived at the above decision having considered that it was the Vendor’s omission to forward complete security documents that ultimately led to the lapse of sale completion date.

This issue has been discussed in the High Court case of Tieh Boon Tuck v Evonne Lee Pei Chen & Anor [2014] 1 MLJ 882.

Brief facts of the case

The Purchaser and Vendor had entered into a sale and purchase agreement (‘SPA’) for purchase of a property.

26 March 2011 was the original completion date but was extended to 26 April 2011 (‘the first extended completion date’) subject to late payment interest being paid by the Purchaser.

Purchaser’s solicitor then paid the loan sum owed by the Vendor to Vendor’s financier to settle the Vendor’s loan. After the first extended completion date lapsed, the Vendor forwarded the original security documents to the Purchaser’s solicitor.

Further extension of time to settle the balance purchase price was requested and agreed by the Vendor, subject to the late payment interest.

However, it was found that one of the original security documents was defective and the said security document was returned by the as the Vendor’s signatures had not been attested to and dated.

The Vendor did not return the said document by the expiry of the second extended completion date but instead issued the notice of termination of the SPA.

Purchaser’s Claim

In this case, the Purchaser claimed for specific performance of the SPA by compelling Vendor to perform its contractual obligations, i.e. tosell the property to Purchaser.

Vendor’s Defence

Whereas, the Vendor counter-sued for Lawful termination of the SPA since the Purchaser had failed to pay the balance purchase price by the second extended completion date and the late payment interest.

The High Court Decision

Dismissed the Purchaser’s claim and allowed the Vendor’s counterclaim save for the claim for damages.

Hence, the present appeal in the Court of Appeal.

Issues of the case

1. Did the Purchaser breach the SPA by not paying the balance purchase price by the second extended completion date;
2. Did the Purchaser breach the SPA by not paying the late payment interest to the respondents within the extended completion date

First issue

1. The Purchaser SHOULD NOT be held responsible for the omission by the Vendor. It was obligatory on the Vendor to forward the complete original security documents in good order to the Purchaser’s solicitor. The fact that one of the original security documents was defective was a responsibility which the Vendor had to bear.
2. The said security document had been duly amended and was in the possession of the Vendor’s solicitor as at 1 July 2011 but was not forwarded to the Purchaser’s solicitor.
3. Vendor should have returned the duly amended original security document to enable the Purchaser’s solicitor to forward the same to financier for the release of balance purchase price. Therefore, the Purchaser was not in breach of a fundamental term of the SPA.
4. The Purchaser was ready, willing and able to complete the SPA. In addition, there was nothing suggesting that Purchaser had intended to abort the purchase and to allow the deposit sum to be forfeited by the Vendor.

The court is of the opinion that the Purchaser would have been able to complete the SPA if the Vendor had returned the duly amended security document to Purchaser’s solicitors in due course. This was not a case of where a Purchaser had no monies to complete the transaction.

Second issue

1. The Purchaser was not in breach of the SPA when he did not pay any late payment interest by 30 June 2011 as the Vendor was in breach of the SPA for reasons as discussed earlier – Vendor had failed to return the duly amended deed of assignment to the Purchaser’s solicitor by 30 June 2011 which was in the possession of the Vendor’s solicitor as at 1 July 2011, as requested.
2. The Purchaser was also not informed of the amount calculated to be due and payable by way of late payment interest.

Key Takeaway of the case

The court has taken into consideration that the Purchaser was always ready and willing to proceed with the purchase of the property and this was certainly not a case of where a purchaser had no monies to complete the transaction.

The parties to the transaction shall take all necessary actions to remedy or rectify the defective documents so as to ensure that the transaction could be completed expeditiously.