QUESTION 2

Mr Tan Chee Kok, a well-known property developer, entered into a sale and purchase
agreement with Datuk Rajaratnam where Mr Tan Chee Kok agreed to sell a piece of land held
under GM1540 and known as Lot 799, Mukin Batu, District of Kuala Lumpur, Wilayah
Persekutuan together with the premises. Among the agreed terms of the sale and purchase
agreement were:
i) Purchase price RM999,000
ii) Deposit of RM99,900
iii) The balance of the purchase price was to be paid in the following manner:
a) 20% of purchase price within six months from the date of the agreement
which is 15 May 2009
b) Final sum being 70% of RM999.000, within nine months from the date of
agreement.

These terms were incorporated in the sale and purchase agreement, executed on 15 November
2008. Upon the execution of the agreement, Mr Tan Chee Kok took steps to terminate three
existing tenancies together with the termination of the business of a budget hotel operated by
Suria City Sdn Bhd at the said premises by adequately compensating the tenants.

There were three agreements terminating the respective tenancies and Mr Tan Chee Kok had
to pay a total sum of RM83.000 in damages to the tenants.

By November 2009, Datuk Rajaratnam made a total payment of RM399.900, but failed to
pay the balance of RM599.100. Mr Tan Chee Kok sent a notice to Datuk Rajaratnam
demanding the payment of RM599.100 and subsequently there were negotiations wherein
Datuk Rajaratnam evinced an intention to complete the sale at a lower price. However, the
negotiations failed.

Upon the failure of the negotiations, Mr Tan Chee Kok issued another notice to Datuk
Rajaratnam but unfortunately he refused to complete the sale.

a) Assume that there is a valid contract between Mr Tan Chee Kok and Datuk Rajaratnam and
that liability against Datuk Rajaratnam is established. Advise Mr Tan Chee Kok if he is
entitled to specific performance and other remedies, if any. (7.5marks)

Issue : Whether or not Mr Tan Chee Kok is entitled to claim against Datuk Rajaratnam for
specific performance and other remedies?

Law :
Introduction/General Rule Specific Performance:
● The relief of specific performance is governed by the Specific Relief Act 1950 (SRA)
 ● Specific performance is an equitable relief that is given not as of right, but according
to the discretion of the Court - Section 21(1) of SRA
● It should be noted that specific performance will be granted only in exceptional
circumstances, and its availability is generally subject to the condition that damages
will not be an adequate remedy.
● Upon granting such remedy, the defendant will be required to fulfil his obligations
and perform the terms of the contract as agreed. A party to a contract cannot obtain an
order for specific performance if he himself breaches his obligation and is not ready
and able to perform the contract.
● In exercising this discretion, the court must be guided by principles contained in
Chapter II of SRA 1950 and judicial principles.
● Section 4(b) SRA - Specific relief is given by ordering a party to do the very act
which he is under an obligation to do

Judicial principles
● In Zainab bte Mohamed @ Jenap bte Mahmood v Syarikat Permodalan Johor (PP)
Sdn Bhd (in liquidation) [1998] 4 AMR 4110 - for the remedy of specific
performance to be invoked, the following conditions must be fulfilled
1. The contract must be valid in form
2. Has been made between competent parties
3. Is unobjectionable in its nature and circumstances
● Another additional principle is that the plaintiff must have performed or had been at
all times ready and willing to perform his part of the bargain.

Contract which may be specifically enforced

● (Chapter II of SRA 1950) - Section 11(1) of SRA laid down four situations in which
a contract may be specifically enforced :
a) When the act agreed to be done is in the performance, wholly or partly
b) When there is no standard for ascertaining the actual damage caused by
the non-performance of the act
c) When the act agreed to be done is such that pecuniary compensation for
its non-performance would not afford adequate relief
 d) When it is probable that pecuniary compensation cannot be got for the
non-performance of the act agreed to be done
Section 11(1)(b) SRA - no standard for ascertaining the actual damage caused by the
non-performance of the act agreed to be done;
● Gan Realty Sdn Bhd v Nicholas - The court granted the plaintiff specific
performance of a sale and purchase agreement of shares as they were not available in
the open market

Section 11(1)(c) of SRA - Pecuniary compensation inadequate relief

● This provision provides that when the act agreed to be done is such that pecuniary
compensation for its nonperformance would be inadequate, the court would more
likely exercise its discretion to grant specific performance.
● Lim Sin Oo & Ors v Cheah Tjeng Siong [1989] 2 MLJ 44 - the High Court ordered
specific performance of a contract for the sale and purchase of the land at the instance
of the plaintiff (vendor). This was because. The plaintiff had, in contemplation of the
execution of the agreement, terminated three existing tenancies on the property and
paid compensation to the tenants. The plaintiff had also terminated a business which
was carried on at the property and had compensated one Toh Hock Chuan who
managed the business. The plaintiff had suffered loss and damage. No business could
be carried on at the premises thereafter when the defendant failed to complete the
agreement. In the circumstances of the case, damages would not be an adequate
remedy to the plaintiff and the agreement between the plaintiff and the defendant is
ordered to be specifically enforced and carried into execution.

Section 18 - Power to award compensation

● Section 18(1) - a person suing for specific performance of a contract may also ask for
compensation for its breach, either in addition to, or in substitution for, its
performance
● As the compensation is expressed to be in addition to or in lieu of specific
performance, it has been held that, for the provision to apply, the plaintiff must have
sought specific performance in the first place.
● Section 18(3) - empowers the Court to award compensation in addition to specific
performance, in cases where the Court has decided that specific performance ought to
 be awarded. But that specific performance alone is not sufficient to satisfy the justice
of the case.
● Quan Ban Poh v Dragon Garden Pte Ltd [1985] 2 MLJ 159 - the High Court
granted the plaintiff’s application for specific performance of a contract for the sale of
land together with a house to be constructed on it by the defendant. The plaintiff was
also awarded under Section 18(1) and (3) of SRA
● However, the Court will not award compensation under Section 18(3) if it is satisfied
that specific performance in itself is a sufficient remedy

Section 19 SRA - Liquidation of damages not a bar to specific performance

● A contract, otherwise proper to be specifically enforced, may be enforced, though a
sum be named in it as the amount to be paid in case of its breach, and the party in
default is willing to pay the same.
● Lim Sin Oo & Ors v Cheah Tjeng Siong [1989] 2 MLJ 44 – the court noted that even
if it is a breach of the SPA by the purchaser which would entitle the plaintiff of
damages based on the agreement, it is still not a bar to a claim for specific
performance by the plaintiffs.

Application :
● In the current situation, in order for Mr Tan Chee Kok to successfully apply for
specific performance, by virtue of Zainab bte Mohamed @ Jenap bte Mahmood v
Syarikat Permodalan Johor (PP) Sdn Bhd, there are a few judicial principles that
he needs to satisfy. Based on the facts of the question, it was mentioned that there is
indeed a valid contract between Mr Tan Chee Kok and Datuk Rajaratnam, therefore, it
can be presumed that the principles in Zainab bte Mohamed are all satisfied as there
is a valid contract and the contract was made between Mr Tan Chee Kok and Datuk
Rajaratnam who are competent and that there contract entered between them is
unobjectionable in its nature and circumstances. The additional judicial principle is
also fulfilled as it can be seen that Mr Tan Chee Kok upon entering a contract with
Datuk Rajaratnam, was willing to perform his part of the bargain as in order to ensure
that he is able to deliver vacant possession to Datuk Rajaratnam, he had terminated
three existing tenancies agreement and a business operation that was operating on the
particular land that was the subject matter of the agreement.
● Applying section 11(1)(b) SRA, being a unique nature of land, it cannot be
ascertained the actual damage caused by the non-performance of the contract of sale
and purchase of the land. In reference to Gan Realty Sdn Bhd v Nicholas, the court
may award specific performance against Datuk Rajaratnam
● Furthermore, by virtue of Section 11(1)(c) of SRA, it can be arguably said that the
present situation falls under the category of contracts which may be specifically
enforced. This is because, similarly with Lim Sin Oo & Ors v Cheah Tjeng Siong,
Mr Tan Chee Kok, upon contemplation of the contract entered into with Datuk
Rajaratnam had terminated three existing tenancy agreements of his land and had also
terminated the business of a budget hotel operated by Suria City Sdn Bhd. Mr Tan
Chee Kok had compensated each and every one of them, causing him to suffer
damages amounting to RM83,000.
● In the present situation, upon failure of Datuk Rajaratnam to pay the remaining
purchase price within the agreed period, in which due to this reason he had breached
the contract, by merely granting Mr Tan Chee Kok with damages, it will not be
sufficient to adequately compensate him for his loss of three tenancy agreement and a
business operation on his land. That is to say that by merely granting the award of
damages, Mr Tan Chee Kok will not be put back at the position that he would be if the
contract did not take place. Therefore, since damages is proven to be an inadequate
remedy, the Court should instead, grant Mr Tan Chee Kok the remedy of specific
performance in which the Datuk Rajaratnam needs to be directed by the Court to
honour his part of the contract and pay the remaining balance of the purchase price,
RM599,100.
● Moreover, by virtue of Section 18(1), since Mr Tan Chee Kok is suing for specific
performance, he can also claim for compensation. However, as per Section 18(3) and
Quan Ban Poh v Dragon Garden Pte Ltd, in order for Mr Tan Chee Kok to be
granted with compensation in addition to the specific performance relief sought, he
needs to be able to prove that the remedy of specific performance in directing Datuk
Rajaratnam was insufficient to satisfy the justice of the case. If he is able to prove as
such, then Mr Tan Chee Kok will be entitled to both specific performance and
compensation.
● Based on section 19, Mr Tan Chee Kok will not be barred from claiming for specific
performance other than damages.
Conclusion : Mr Tan Chee Kok is entitled to claim against Datuk Rajaratnam for specific
performance and may be entitled to claim for compensation as well provided that he could
adduce evidence that the relief of specific performance is an insufficient remedy.
Meanwhile, Ms Grace Tan, Mr Tan Chee Kok's daughter who runs her own boutique business
had plans to expand her business. She found a suitable premise with a perfect location and
hurriedly entered into a tenancy agreement with the owner of the premises, Mr. Clanrance
Chow.
The tenancy agreement executed was for a period of three years, from 1 October 2007 to 31
October 2010.
However, immediately after the execution of the agreement, it was made known to the parties
that the owner of the premises was unable to deliver vacant possession. The reason being that
the previous tenant had refused to leave the premises. Ms Grace Tan was very adamant and
insisted on proceeding with the agreement and even attempted to pay the monthly rental
which Mr. Clanrance Chow refused to accept. One year after the execution of the said
tenancy agreement Ms. Grace Tan issued a notice to terminate the agreement and sued for
damages.
She claimed for:
i) Loss of profit for three years amounting to RM97.200
ii) Money expended for the purchase of furniture and mannequins in preparation for carrying
on business at the said premises.
Discuss the probabilities of Ms Grace Tan claiming for both her loss of profit and her money
expended for the purchase of furniture and mannequins.

Issue: The issue is whether Ms Grace Tan will succeed in claiming both loss of profit and
money expended for the purchase of furniture and mannequins?

Law:
● Section 74 of the Contracts Act 1950 & Victoria Laundry (Windsor) Ltd v
Newman Industries Ltd [1949] 2 KB 528: 1. entitled to recover part of the loss
which would be considered as the loss that is reasonably foreseeable if the breach is to
occur; 2. the party who commits the breach possesses knowledge of such
circumstances
● knowledge "possessed" is of two kinds; imputed and actual knowledge.
● Hadley v Baxendale [1854] EWHC J70 which introduced the test of remoteness
consisting of two limbs. First limb: in relation to losses that arise naturally. Second
limb: losses that are within the contemplation of the parties.
● Expectation interest / loss is the income which the innocent party had expected to
obtain out of the contract but was loss due to the breach of contract, i.e. a claim of
loss of profit – monetary gains. Secondly, the objective of granting damages is to
protect the innocent party’s reliance interest. Besides the expectation interest, the law
also protects the reliance interest of an injured party. Here the law aims to put the
 plaintiff in a position he would have been in had he not entered into the contract with
the contract breaker.

1. Loss of Profits:

● This claim is to put the plaintiff in the position he would have been in had the contract
been performed. When parties enter into a contract, the binding promise creates an
expectation of performance. Thus, the breach of such contract entitles the aggrieved
party to a remedy that would fulfil, if not, protect that expectation.
● Loss of profits in this case is income which the aggrieved party expected to obtain out
of the contract but was loss due to the breach.
● In order to successfully claim for expectation loss, actual loss must be established
through factual evidence and such losses must not be too remote.
● Ban Chuan Trading Co Sdn Bhd v Ng Bak Guan: The parties entered into a
three-year tenancy agreement in which the appellant failed to deliver vacant
possession as the previous tenant refused to vacate the premise. Despite having been
informed, the respondent attempted to pay the monthly rents, which the appellants
refused to accept, and did not take any action to repudiate the agreement. A year later,
the respondent issued a notice to terminate the agreement and claimed from the
appellant loss of profits and money expended for the purchase of furniture and
mannequins in preparation of continuing his business at the new premise. However,
the Court of Appeal found that the respondent was only entitled to the money
expended and not the loss of profits. In claiming for loss of profits, the respondent
stated that he intended to use the said premise for his business of selling clothes where
he expected his business profits to increase by 20% because of the location of the said
premise which was more favourable than the shop that he was occupying. To support
his claim, the respondent tendered the assessments by the Inland Revenue
Department in respect of his income for the years of assessment 1991-1993.
However, the assessments should not have been admitted as they were in respect
of the respondent's personal income and not his income from his business of
selling clothes. Thus, there was no evidence to support the claim that the
respondent's business would increase by 20% if he moved to the said premise. Mere
assertion is not evidence, what more when the figure arrived at was 20%. The
production of the assessments alone should not be allowed. Other evidence must be
 adduced to show that income stated in those assessments were income from his
business of selling clothes. There was also no evidence to show that the respondent
would carry on the business of selling clothes there except his declaration of his
intention to do so. The intended use of the premise was not stated in the
agreement. Thus, the appellants should not be penalized for a matter which they had
no knowledge of (too remote). The respondent knew soon after signing the
agreement that the said premise were not available due to the fact that the existing
tenant refused to move out and hand over vacant possession. Instead of terminating
the agreement immediately, he waited for a year and then claimed for loss of
profits for three years. The respondent knew that his business of selling clothes was
not affected because he continued to carry on the business in the other outlet. The
respondent could have minimized his losses if he had taken steps to terminate the
agreement as soon as it was made known to him that the premise was not available.
Instead, he waited in order to justify his claims of loss of profits for three years
(failure to mitigate losses)
● Blue Sea Pools Swimming Centre Sdn Bhd v Loo Ah Chew & Sons Sdn Bhd: In
this case, the court found that the plaintiff's claim in respect of losses of profit for
membership at the swimming centre were not sustainable as they were mere
speculations, conjectures or projections, not supported by evidence adduced
from market experts in a similar service and hospitality industry, establishing such
losses on a balance of probabilities.

2. Money expensed on furniture and mannequins:

● Mc Rae v Commonwealth Disposals Commission (1951) 84 CLR 377 (High
Court of Australia): Reliance interest / loss are at times known as wasted expenses.
Reliance loss arises where the plaintiff has incurred expenses in preparing to
perform the contract which is then wasted.
● For a claim on reliance interest/loss or wasted expenditure, the innocent party may
recover expenditure incurred before or after the contract provided that the expenditure
was reasonably contemplated. (must not be too remote)
● Anglia Television Ltd v Reed [1972] 1QB 60: the plaintiffs entered into a contract
with the defendant to act in a film which the plaintiff was going to make. However at
the last moment, the defendant in breach of contract, refused to act. Since the plaintiff
could not find a replacement, they abandon the project. Plaintiff sued for breach of
 contract. They didn’t claim for loss of profit – no certainty of success of an unmade
film. Instead they claim for 2,750 pounds as expenses incurred in the preparation
of the film such as engaging a script writer, hiring other actors, scouting for
locations = wasted expenses.
- Lord Denning: If the plaintiff claims the wasted expenditure, he is not limited to
the expenditure incurred after the contract was concluded. He can claim also the
expenditure incurred before the contract, provided that it was such as would
reasonably be in contemplation of the parties as likely to be wasted if the contract
was broken.

Application:
● Similar to the facts of the case in Ban Chuan Trading, Ms Grace Tan entered into the
tenancy agreement and waited a year to claim for loss of profits for 3 years. She
already knew that the owner of the premises was unable to deliver vacant possession
with reason being that the previous tenant had refused to leave the premises.
However, Ms Grace Tan still insisted on proceeding with the agreement, even paid for
rentals although Mr. Clanrance Chow refused, and waited a full year before claiming
for loss of profits. This shows that Ms Grace Tan had failed to mitigate her losses
when she could have immediately terminated the agreement when it was made to
known about the inability of Mr. Clanrance Chow to deliver vacant possession due to
the previous tenant. Therefore, Ms Grace Tan’s claim for loss of profits for three years
is not likely to succeed as she failed to mitigate her loss and her claim is too remote.
● Ms Grace Tan’s expenses on mannequins and furniture is not too remote to be
claimed, as it is part of her boutique business. The court should consider Ms Grace
Tan’s expense in cost preparing for her boutique business for the premise, which shall
be considered as wasted expenditure.
● Since the claim for loss of profits would not succeed as Ms Grace Tan failed to
mitigate her own loss, then there is no issue on principle of election as only the claim
for wasted expenditure would succeed.

Conclusion: In conclusion, Ms Grace Tan will only succeed in claiming for money expended
for the purchase of furniture and mannequins and not for loss of profits.