A contract is simply a legal document that confers certain benefits and imposes certain burdens on the contracting parties. Hence, in the simplest example, a sale and purchase agreement for a property imposes the burden on the seller to transfer the property to the purchaser, and confers the benefit to the seller to receive the purchase price. Seen from the purchaser’s perspective, these benefits and burdens would be a mirror-image of the seller’s.

Sometimes, the benefit are meant to be for third parties. Such was the case when a developer, Austral Development Sdn Bhd, went into liquidation. They had intended initially to develop a housing project known as the Austral Yarra Link. At the point in time when they went into liquidation, 198 houses were already sold to end purchasers.

The liquidators sold the land on which the Austral Yarra Link development was to be built to Glomac Alliance Sdn Bhd. The agreement expressly excluded the 198 houses, as ought to be the case.

Glomac Alliance Sdn Bhd completed the development of the Austral Yarra Link project, but thereafter refused to transfer the 198 houses to the end purchasers. One of the affected end purchasers, Nordin bin Md Zain, took the matter to Court.

Glomac Alliance Sdn Bhd argued in Court that there was no privity of contract between itself and En Nordin. Hence, its agreement with the liquidators cannot be construed to the benefit of En Nordin who was a non-party to the contract.

The learned judicial commissioner at the High Court disagreed with Glomac. However, on appeal, the Court of Appeal held that the doctrine of privity was well settled and since En Nordin was not a party to Glomac’s agreement with the liquidators of Austral Development Sdn Bhd, he could not enforce any rights based on the said agreement against Glomac.

Unfortunately, this raises more questions than answers. What then happens to the 198 units which were expressly excluded from Glomac’s agreement? Surely the exclusion was on the basis that rights have been created over the land in favour of the 198 end purchasers. What are the 198 end purchasers then to do in order to enforce their right to the lands they purchased?

Could the decision have gone in another direction if En Nordin had chosen not to mount this action as a contractual claim against Glomac? Perhaps En Nordin ought to have sought a declaration that he is the rightful owner of the house which he bought, and consequential orders flowing therefrom which would have given him the exact same reliefs as he sought against Glomac.

However, to say that one has a justifiable claim if only it was pleaded differently seems to be giving weightage to procedural law over and above substantive justice. Surely, the interests of justice must prevail.

Note

This is a commentary on the Court of Appeal decision of Glomac Alliance Sdn Bhd v Nordin bin Md Zain [2023] 3 MLJ 393 CA by Chan Kheng Hoe ([email protected]).