Farlim Group (Malaysia) Berhad v Ayer Itam Properties Sdn Bhd

Appellant(s): Farlim Group (Malaysia) Berhad

Respondent(s): Ayer Itam Properties Sdn Bhd

• Dato' Dr. Choo Kah Sing
• YA Datuk Dr Lim Hock Leng
• YA Dato' Amarjeet Singh a/l Serjit Singh

• The appellant/vendor and respondent/purchaser entered into a sale and purchase agreement (SPA) in 2013 for three parcels of land, including a 1/4 undivided share in Lot 1561, priced at RM110 per square foot based on the full area of the share (657,342.97 sq ft).
• Unknown to the purchaser at the time, a 2007 Settlement Agreement between the original proprietor and a related company of the vendor had expressly excluded portions of Lot 1561 previously sold to five caveators (totalling 76,255 sq ft) from the transfer eventually made to the vendor.
• The vendor nonetheless included the caveated portions in calculating the purchase price under the SPA, and the purchaser only discovered the effect of the Settlement Agreement after commencing separate litigation with one of the caveators in 2016/2017.

• Whether the vendor in fact owned, and was entitled to sell, the whole of the 1/4 undivided share in Lot 1561 that formed the basis of the purchase price calculation, given the prior exclusion of the caveated portions.
• Whether the purchase price was a fixed global sum unrelated to the RM110 per square foot rate, such that no adjustment could be claimed, and whether the entire agreement clause precluded reliance on extrinsic negotiations.
• Whether the purchaser's completion and registration of the transaction, despite awareness of the caveats, amounted to affirmation or waiver, and whether sections 21 and 23 of the Contracts Act 1950 (mistake) barred any claim for restitution.

• The Court held that, by virtue of the exclusions in the 2007 Settlement Agreement, the vendor never owned the full 1/4 share and could not pass title to the 76,255 sq ft attributable to the caveators, applying the nemo dat quod non habet principle as affirmed in Sia Hiong Tee & Ors v Chong Su Kong & Ors.
• The Court rejected the vendor's "global sum" argument, holding that Clause 3.1 and Appendix 1 of the SPA clearly tied the purchase price to the RM110 per square foot rate, and the entire agreement clause (Clause 21.1) precluded reliance on prior oral discussions to the contrary.
• The Court upheld the trial judge's finding that the purchaser only learned of the true effect of the Settlement Agreement during later litigation, rejecting the vendor's waiver, affirmation and mistake defences, and affirmed the order for restitution of RM8,388,050.00 based on the principles in Dream Property Sdn Bhd v Atlas Housing Sdn Bhd; the appeal was dismissed with costs of RM50,000.00.