9 Years, 0 Progress, Squatters Still On Site: Court of Appeal Invokes Equitable Powers to Terminate a JVA Despite the Developer’s Successful Challenge to Unilateral Termination

In Pembinaan Lercast Sdn Bhd & Lercast Aldeway Sdn Bhd v Chek Sam binti Salleh [2026] CLJU 330, the Court of Appeal (COA) partially allowed the Developers’ appeal against the Penang High Court’s decision. While the High Court upheld the elderly landowner’s unilateral termination of a 2015 Joint Venture Agreement (JVA) for prolonged inaction on squatter-occupied land, the COA ruled that the 2018 Supplemental Agreement (SA) required mutual consent for termination, making the unilateral notice wrongful. However, invoking its inherent equitable powers under s. 69(4) of the Courts of Judicature Act 1964 due to an irretrievable breakdown in the parties’ relationship, the COA ordered the immediate termination of all agreements (JVA, Power of Attorney, Manager Agreement, and SA). It varied the High Court orders on the deposit and costs.

Background of the Case

• The Respondent (Plaintiff), an elderly lady with limited formal education, is the registered proprietor of a land in Teluk Kumbar, Penang (“the Land”), which was occupied by squatters with a registrar’s caveat entered in 2006.
• In 2015, after being advised against a waqf (endowment), she appointed the said advisor to facilitate development and entered into:
• Joint Venture Agreement (28 July 2015) with the 1st Appellant;
• Irrevocable Power of Attorney (28 July 2015) in favour of the 1st Appellant;
• Consultant Agreement (18 September 2015) and Manager Agreement (9 December 2016) involving the 2nd Appellant.
• The project stalled for over two years; the Respondent issued a first termination notice in July 2017.
• Parties then executed a Supplemental Agreement (10 October 2018) to revive the project (including a RM700,000 deposit mechanism for squatter settlement). The caveat was withdrawn in April 2019.
• No meaningful progress occurred thereafter (no layout/building plans prepared or submitted, no developer’s licence, no financing raised, squatters not relocated). The Respondent terminated again via solicitor’s letter dated 28 October 2021.
• Suit filed in 2022 against the two developers and their former solicitors (claim against solicitors discontinued).

Court Rulings

High Court

• After a 5-day trial, the learned judge found the developers in breach of core obligations under the JVA (cl. 2.1, 3.1) and SA: failure to prepare/submit plans within stipulated timelines, failure to obtain approvals and developer’s licence, failure to negotiate/relocate squatters, and overall failure to develop the land over 9 years. Time was of the essence (cl. 20 JVA). The court rejected the developers’ defence that vacant possession was solely the landowner’s responsibility (given the POA and contractual allocation of duties).
• Declarations granted that the JVA, Power of Attorney, Manager Agreement, and SA were terminated due to the 1st Defendant’s breach (misrepresentation claim dismissed). The High Court ordered for the return of original title and removal of private caveat within 7 days; refund of deposit + accrued interest; costs payable by Defendants. No damages awarded.

Court of Appeal: Allowed the appeal in part.

It held that:

• Clause 1 of the SA expressly required mutual agreement for any termination; the landowner’s unilateral notice was therefore wrongful.
• The High Court erred in not fully appreciating the contractual sequencing: vacant possession/squatter resettlement logically preceded submission of plans and applications (supported by the POA, Consultant Agreement, and letter of instructions to solicitors).
• However, the relationship had completely broken down (blame-shifting, interference by Dato’ Idris, loss of mutual trust and confidence), rendering further performance impossible. Exercising inherent equitable jurisdiction (s. 69(4) CJA 1964), the COA declared all agreements terminated forthwith. It varied the orders: return of title and removal of caveat within 7 days; the RM500,000 deposit to be refunded to the developers within 30 days; each party to bear its own costs in both courts. No damages.

Key Takeaways

1. Termination clauses are strictly construed: A supplemental agreement can override or restrict a party’s unilateral right to terminate under the principal contract.
2. Contractual sequencing matters: In squatter-land JVAs, courts will examine the logical order of obligations (e.g., vacant possession before plan submissions) rather than treating every covenant in isolation.
3. Long inaction is risky but not always fatal: Even where unilateral termination is wrongful, Malaysian courts retain wide equitable powers to bring a deadlocked commercial relationship to an end.
4. POA plus development JVA creates heavy obligations: Developers granted absolute authority must demonstrate concrete steps (plans, approvals, financing); mere reliance on squatters as an excuse is insufficient after years of delay.
5. Drafting lesson: Include clear, realistic timelines, express “time of the essence” provisions, and mutual-termination safeguards in property JVAs involving elderly or less sophisticated landowners.