COURT OF APPEAL (PUTRAJAYA)
LEE SWEE SENG, S NANTHA BALAN AND NORDIN HASSAN JJCA
CIVIL APPEAL NO C-02(NCvC)(W)-607-03 OF 2021
3 May 2023
JUDGMENT OF THE COURT
[1] The circumstances under which the Court may intervene with the freedom of contract are limited. It is easier to intervene in cases of illegality where parties cannot agree to do that which the law prohibits. What then is the position where a matter is not prohibited by statute but expressly stated as a right of a party?
[2] The question then is whether contracting out of a statute would be permitted. Should the Court nevertheless refuse to enforce such a term if to do so would unfairly prejudice the rights of the weaker party to the bargain, or that it would defeat the purpose of the law or be contrary to public policy. Interestingly in this appeal, the issue is whether a developer can enforce a term in an agreement where the purchaser has agreed not to apply for change of category of land use from “agriculture” to “building” for the land that he purchased.
[3] The purchasers here had obtained the approval of the State Authority for such a conversion and have constructed, with the approval of the local authority, on the once agriculture land a long house straddling the 2 pieces of land, one bought by the husband and the other by the wife, from the developer and which the wife subsequently transferred to the husband.
[4] The developer insisted that it is a breach of the contract represented in the Sale and Purchase Agreement (“S&P”) and the Deed of Covenants (“DOC”) signed between the developer and the purchaser for each parcel of the agricultural land in the development in Janda Baik in Pahang.
[5] The purchasers argued that the National Land Code (“NLC”) conferred such a right to the registered proprietor and whilst the S&P and DOC had been entered into, very significantly this so-called restriction does not appear on the subdivided titles when they were subsequently issued. It was argued that the contractual restrictions cannot take away the rights of the purchasers as reflected in the subdivided titles without such a restriction and moreover the NLC expressly grants such a right to the registered proprietor of the land.