In the recent decision of Ritz Garden Hotel (Cameron Highlands) Sdn Bhd v Balakrishnan Kaliannan (Civil Appeal No. 02-9-03/2012(C), 15 August 2013), the Federal Court’s failure to apply the well-known adage that “time is money” has resulted in a decision which is both contrary to commercial sense and a miscarriage of justice.In Ritz Garden, the appellant and the respondent had entered into an agreement for the sale and purchase of land in Pahang owned by the respondent for a sum of RM1,000,000. RM250,000 was paid by the appellant as deposit and part payment upon the execution of the sale and purchase agreement, whereas the balance purchase price of RM750,000 was to be paid by way of the appellant issuing 20% of its paid up share capital to the respondent. The land was transferred to and registered in the name of the appellant. However, the appellant failed to settle the balance purchase price, and the respondent purported to terminate the sale and purchase agreement due to the appellant’s breach, thereafter commencing proceedings against the appellant for, among others, (i) rescission of the sale and purchase agreement; (ii) retention of the RM250,000 as payment towards general damages; and (iii) the re-transfer of the land to the respondent.
The High Court did not grant the reliefs prayed for by the respondent. Instead, the High Court ordered the appellant to pay the balance purchase price of RM750,000 to the respondent within a reasonable time after the removal of the private caveats lodged over the land by the respondent.
On appeal to the Court of Appeal, the respondent confined his appeal to the issue of pre-judgment interest on the judgment sum of RM750,000. The Court of Appeal allowed the respondent’s appeal to the extent that it awarded the respondent pre-judgment interest on the sum of RM750,000.00 at the rate of 8% per annum from the date of the writ to the date of judgment.
The Federal Court, by a majority (Raus Sharif PCA, Hasan Lah, Abdull Hamid Embong and Ahmad Hj. Maarop FCJJ), allowed the respondent’s appeal on the ground that since the sum of RM750,000 was ordered to be paid after the removal of the caveats, pre-judgment interest could not therefore be ordered to be paid from the date of the writ. Hasan Lah FCJ, delivering the judgment of the majority, observed:-
[21] With respect I am unable to agree with the contention by the [appellant] that the proceedings tried in the High Court was not for the recovery of any debt or damages, as the remedies sought by the [respondent] were for rescission of the Agreement, for the deposit of RM250,000.00 to be forfeited, for rectification of the land register and for damages. It is to be noted that in prayer (G) of his statement of claim the [respondent] prayed for “Lain-lain dan/atau apa-apa relif dan/atau perintah berlainan atau berlanjutan yang Mahkamah Yang Mulia ini fikirkan suai dan manfaat ”(Any other or further relief or order which this Honourable court deems fit)”. This omnibus prayer must not be treated as a mere ornament to pleadings devoid of any meaning (see Lim Eng Kay v Jaafar bin Mohamed Said [1982] 2 MLJ 156; [Tan Tek Seng v Suruhanjaya Perkhidmatan Pendidikan [1996] 1 MLJ 261].)
[22] In my view, when the learned trial Judge ordered the [appellant] to pay the [respondent] the balance purchase price of RM750,000.00 she had in her mind this omnibus prayer in the [respondent]’s statement of claim. She was entitled to do so on the facts of this case as the Land had been transferred to the [respondent]. …
[27] Based on the order of the learned trial Judge the [respondent] was only lawfully entitled to the money after the caveats on the Land were removed and not earlier than that. In other words prior to the removal of the caveat he could not say that he had been deprived of the use of the money. As such, with respect, I am of the view that the Court of Appeal has erred when it ordered the interest on the judgment sum to be paid from the date of the writ.
Zaleha Zahari FCJ dissented. Her Ladyship highlighted that “pre-judgment and post-judgment interest is an important part of the total award as the litigation process for any given case can take years to complete. In this particular case, the litigation process from date of filing … to date of judgment of the High Court … has taken a period of more than ten years.”
Her Ladyship then (correctly) observed that that the High Court judge did not in fact dismiss the respondent’s claim. The High Court judge had held that the appellant was in default of the sale and purchase agreement in failing to pay the balance purchase price of RM750,000 to the respondent even though the Land had been transferred to and registered in the name of the appellant. What the High Court judge had decided was that the appropriate relief to be ordered was to require the appellant to pay the balance purchase price to the respondent, and not the rescission of the agreement or the return of the land.
Her Ladyship then made the following pertinent observations:-
I am of the considered opinion the argument that the [respondent] is not entitled to both pre-judgment interest and post judgment interest by reason of the [appellant]’s obligation to pay the [respondent] the RM750,000.00 only upon the withdrawal of all caveats is misconceived. The [appellant]’s obligation to pay the [respondent] the balance purchase price should have been effected within the period specified in the Agreement. The [appellant] had clearly failed to do.
In a joint venture case such as this, the [respondent] clearly has been denied the shares representing 20% of the [appellant]. The [respondent] has lost the profits which he hopes the [appellant] company would gain from the joint venture undertaken. Despite having proved a breach of the payment clause, the [respondent] is now constrained by the Court order to accept the balance purchase price by way of cash instead of termination. The [appellant] is paying the balance sum in monetary terms for a piece of land at a 1991 price, which land would certainly have appreciated in value over the past twenty years. Had the balance purchase price been paid by the [appellant] in cash way back then, that money would certainly have produced an addition to the [respondent]’s general funds by way of interest earned, which addition would itself have been available to earn interest.
It is respectfully submitted that decision of the majority in the Ritz Garden case was erroneous, and that the minority was clearly correct to uphold the decision of the Court of Appeal. The following observations may be made.
First, the Federal Court’s approval of the High Court judge’s reliance on the “omnibus prayer” to award RM750,000 to the respondent is highly questionable.
There is no doubt that the observations of Salleh Abas FJ in Lim Eng Kay v Jaafar bin Mohd Said [1982] 2 MLJ 156, FC that the omnibus prayer “must not be treated as a mere ornament to pleadings” are well known. However, it should also be noted that barely one year later the Federal Court in Ong Ah Long v Dr S Underwood [1983] 2 MLJ 324, FC distinguished Lim Eng Kay and held that special damages in contrast to general damages have to be specifically pleaded and strictly proved. Furthermore, it is well-established that “you cannot, under a general prayer for further relief, obtain any relief inconsistent with that relief which is expressly asked for.” (Cargill v Bower (1878) 10 Ch D 502, applied in Mokhtar v Arumugam [1959] MLJ 232 CA and also Tan Tek Seng v Suruhanjaya Perkhidmatan Pendidikan [1996] 1 MLJ 261, CA, which the majority referred to in its judgment)
In Ritz Garden, the High Court’s order requiring the respondent to pay the balance purchase price of RM750,000 to the appellant can be interpreted as either an order compelling specific performance of the sale and purchase agreement, or an award of special damages for breach of contract by the respondent. On either view, the High Court’s order was clearly an illegitimate use of the “omnibus prayer”, because the appellant did not specifically pray for special damages of RM750,000, and the relief granted was clearly inconsistent with the relief expressly asked for by the appellant, i.e. rescission of the sale and purchase agreement and re-transfer of the land. It appears that the Federal Court did not consider or fully appreciate decisions such as Ong Ah Long and Mokhtar, which would have clearly pointed to the conclusion that the High Court’s order was improperly granted. (It should be noted however that the appellant did not challenge this order made by the High Court judge.)
Secondly, the majority’s reasoning that pre-judgment interest could not be awarded on the judgment sum from the date of the writ, on the ground that the sum of RM750,000 was ordered to be paid after the removal of the caveats, is truly awful and disturbing.
Section 11 of the Civil Law Act 1956 allows the court to award pre-judgment interest “for the whole or any part of the period between the date when the cause of action arose and the date of the judgment.” In Ritz Garden, the respondent’s cause of action for breach of contract clearly arose when the appellant failed to pay the balance purchase price of RM750,000 pursuant to the sale and purchase agreement. It should not be forgotten that the land had already been transferred to and registered in the name of the appellant. From the date of the appellant’s breach (which was well before the date of the writ) until the order of the High Court, the respondent had been kept out of his money for more than 10 years (the respondent’s case was that the period in question was 20 years). Justice clearly demands that the respondent should be awarded pre-judgment interest representing compensation for the deprivation of the use of the sum of RM750,000 for the entire period. That must surely be the very purpose that section 11 of the Act seeks to achieve. Time is money. The Court of Appeal was clearly right to make such an order.
With the greatest of respect, the fact that the appellant was only ordered by the High Court to pay the respondent RM750,000 within a reasonable time after the removal of the private caveats lodged over the land, does not in any way mean that the appellant’s liability towards the respondent would only arise at a later date i.e. upon the removal of the caveats, or that the appellant would not be kept out of his money until the caveats were removed. As correctly pointed out by Zaleha Zahari FCJ in her dissenting judgment, the appellant’s liability towards the respondent in respect of the RM750,000 had accrued and crystallized from the date of the appellant’s breach of contract i.e. from the day it failed to honour its payment obligations under the sale and purchase agreement. The order of the High Court does not in any way change the fact that the respondent had been kept out of the sum of RM750,000, to which he was lawfully entitled, for more than 10 years from the date of the appellant’s failure to pay the balance purchase price. In this regard, the reasoning of Zaleha Zahari FCJ quoted above is not merely convincing. It is completely unanswerable.
It is respectfully submitted that the Federal Court’s refusal to uphold the Court Appeal’s award of pre-judgment interest to the respondent in Ritz Garden is fundamentally unjust. The majority appears to have completely ignored the commercial realities of the case, i.e. that the respondent had been kept out of a substantial sum of money for a substantial period of time, during which at all material times the land had been transferred to and registered in the name of the appellant and had improved in value. Not only did the respondent lose the right to sell the land to another party during the entire period (possibly for a higher price for that matter), more importantly, the respondent was completely denied recovery of pre-judgment interest representing the time value of the loss of use of the sum of RM750,000 for the entire period in question. It is difficult to find a clearer case in which the policy behind section 11 of the Civil Law Act 1956 has been so completely frustrated.
The Federal Court’s decision in Ritz Garden appears to have given rise to unjust enrichment on the part of the appellant at the expense of the respondent. It also may be interpreted as the Federal Court allowing the appellant as a contract-breaker to benefit from its own wrong. That cannot be right.