Breaching A Yet To Be Performed Agreement – Is It Even Possible?
Can you sue a person/entity for a breach of agreement/ contract (that you both entered) which is not yet due to be performed by that person/entity? Let us find out more about it, by briefly look at the case of Yaw Chun Soon v. Newfields Land Sdn Bhd.
Brief facts of the case
Newfields entered into a Share Sale Agreement (“SSA”) with Chun Soon in 2016 to buy the remainder 49% of shares from Chun Soon that Chun Soon holds in Ardent Housing Development Sdn Bhd (“Ardent”) (It must be noted Newfields already held 51% of the shares in Ardent before acquiring the remaining shares from Chun Soon). Newfields then used Ardent to purchase some land from another property developer, Platinum 88 Sdn Bhd, to develop the land for housing purposes. Chun Soon will then buy four terrace houses and one townhouse from Ardent once the development is complete.
However, at the time of the share sale agreement, the developers surrounding the land that Ardent bought had been tasked by Syarikat Bekalan Air Selangor (“SYABAS”) to build a water supply system to provide water supply to the developments surrounding the land. The developers surrounding the land had agreed to build the water supply system on a cost-sharing basis. As Ardent was not a party to the agreement and to ensure that Ardent’s project is connected to the water supply system, Platinum 88 and Ardent agreed to enter into an agreement whereby Platinum 88 agreed and undertook to complete and commission the water supply system for Ardent and Ardent agrees to share the cost for building the water supply system.
It must be noted that at this juncture that the dating of the Sales and Purchase Agreement (“SPA”) and Memorandum of Transfer (“MOT”) for the 4 terrace houses was conditional upon either the completion and commissioning of the water supply system on Ardent’s land (at the expiry of 24 months from the date of completion and commission) or the launch of Ardent’s housing project (12 months from the launch of the sale of the project).
This is where Chun Soon’s claim comes into the picture. Chun Soon wanted to date the SPA and MOT for the terrace houses but this was outright refused by Newfields, as Newfields contended that while a certificate of practical completion was given by SYABAS on 24th September 2016 (the premise of Chun Soon’s claim), SYABAS only allowed for the commissioning of the water supply system on the 2nd October 2018. The dating of the SPA and the MOT can only be done 2 years from the 2nd October 2018.
In essence, Chun Soon claim is based on the fact that Newfields have breached its obligations under the SSA when they refuse to date the SPA and MOT while Newfields claim that they could not have breached the SSA as the agreement is not due to be performed yet.
The court sided with Newfields and struck out Chun Soon’s claim.
Why?
Based on the facts, the court held that Newfields could not have breached the agreement as the agreement is not due to be performed yet (not until 3rd October 2020, 24 months from the commissioning of water supply, coupled by the fact that the housing project was yet to launch as well). The court agreed with Newfields, stating that the certificate practical completion only means that the construction of the water supply system is complete and is certified by SYABAS- it does not mean that SYABAS has commissioned for the water supply system to operate. Simply put, the court held that just because it is completed does not mean it is operational or capable of being put to use by the people who will be buying and staying in the properties on Ardent’s land. This was also in-line with the reading of the Water Services Industry (Water Reticulation And Plumbing) Rules where it states that a certificate of compliance can only be issued i.e. the commissioning of water supply can be done if SYABAS is satisfied that the water system (in the completion stage) is up to par i.e.:
- The approved plans, specifications, and building standards are met;
- The drawings of the water system have been submitted; and
- The system is completed and the system is in proper working order and their spare parts to replace the equipment for the water system.
Accordingly, Chun Soon is not entitled to his claim. To answer the question above, no, the general rule is that you cannot sue another person until and unless the person breaches the agreement.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. For further inquiries, please email us at general@mathews.my.