From High Court Dismissal to Appeal Success: Series of Misrepresentations and Solicitors’ Fiduciary Breaches Lead to Full Refund in Failed Land Purchase Dispute

In Newlake Development Sdn Bhd v Zenith Delight Sdn Bhd & Ors [2026] CLJU 110, the Court of Appeal overturned the High Court’s dismissal of the Purchaser’s (Plaintiff) claims in a failed land purchase transaction involving RM9 million in deposits. The Purchaser, a Property Developer, sued the Vendor (D1), related solicitors (D2 & D3), and D4 for fraud, fraudulent misrepresentation, breach of trust, negligence, and conspiracy after the deal collapsed without the land being acquired, despite payments made over years. The Purchaser has resorted to appeal in which the Court of Appeal found a series of misrepresentations, improper use of funds, and fiduciary breaches, ruling the sale and purchase agreement (SPA) voidable and ordering refunds plus damages.

This Court of Appeal’s decision underscores the critical need for vigilance in property transactions, particularly when intermediaries and solicitors are involved; it serves as a stark reminder that cumulative misrepresentations—beyond isolated disclosures—can vitiate agreements, and solicitors’ pre-engagement advice may trigger fiduciary duties, potentially exposing them to liability for fund mishandling in an era where courts increasingly prioritize tracing money trails to combat fraud.

Background of the Case

The Purchaser, a property development company, sought to acquire a 60,321.48 sqm plot of land near Old Klang Road for development purposes. The opportunity was introduced by D3, the managing partner of the solicitors’ firm, D2. Initially, based on discussions with D3, the Purchaser was advised to purchase through an intermediary company, PVD and payments totaling approximately RM7.7 million were made to D2’s client account between 27 December 2010 and 8 July 2011, purportedly as deposits toward the land acquisition.

This intermediary plan was aborted, and the Purchaser took over as direct purchaser. PVD notified D2 that all prior payments should be treated as made by the Purchaser. Despite payments spanning over a year, no Sale and Purchase Agreement (SPA) was executed until 22 November 2011 between the Purchaser and Vendor, at an initial price of RM15.5 per square foot (later adjusted to RM18 per square foot via a Supplementary Agreement on 13 March 2012). Just before the SPA’s execution, D3 informed the Purchaser’s chairman (PW2) of a conflict of interest, leading to the appointment of the Purchaser’s solicitors.

The transaction stalled due to unresolved issues with the land owners, including negotiations that were misrepresented as advanced or finalized. At a meeting on 19 June 2012, PW2 expressed frustration to D3, citing tied-up deposits and opportunity costs. An email dated 20 June 2012 reiterated this, stating the deposits had been “suffered enough opportunity costs.” The Purchaser attempted termination via a letter dated 19 July 2012, but D2 (on Vendor’s behalf) disputed it on 24 October 2012, claiming unlawful unilateral termination.

A Settlement Agreement dated 23 July 2013 was entered, allowing Vendor to refund the deposits within one month or revive the SPA. Vendor refused the refund in a letter dated 23 August 2013, demanding RM6,093,252 within seven days under the SPA. The Purchaser withdrew termination on 24 August 2013 and nominated another company as assignee on 11 September 2013. An email on 26 September 2013 suggested negotiating the demand with the nominee. Failing payment, the Vendor terminated the SPA on 21 October 2013.

Dissatisfied, the Purchaser sued, alleging a series of misrepresentations inducing the payments and SPA: (a) that the land owners had agreed to sell when negotiations were far from finalized; (b) that the purchase price was RM15.5 psf (later inflated to RM18 psf without justification); (c) that deposits would bear interest (e.g., 7-8% as promised but never paid); (d) urgency in payments to “secure” the deal despite no progress; (e) that the Vendor had authority or back-to-back agreements with owners; and (f) that funds were held as stakeholder when they were dissipated to unrelated parties, including D2’s office account (RM3.57 million) and third parties without documentation. Evidence showed deposits were released per the Vendor’s instructions dated 23 December 2010, contrary to stakeholder assurances. The Plaintiff claimed over RM9 million paid (including RM758,182.75 post-SPA discovery) was induced by these deceptions, leading to total failure of consideration.

Court Rulings

High Court

Dismissed all claims with costs. It was found that there was no misrepresentation, as the SPA recital indicated ongoing negotiations with land owners, and the Purchasers were aware. No stakeholder duty on D2/D3, as payments were not conditioned on a back-to-back SPA. The Settlement Agreement was valid and binding, subsuming prior disputes. No negligence or duty of care owed by D2/D3, as Purchasers had their own solicitors. No dishonest assistance by D4, as no trust relationship existed. Evidence from a criminal trial was hearsay, and Purchasers failed to prove land owners’ unwillingness to sell.

Court of Appeal

Unanimously allowed the appeal, set aside the High Court decision, and granted reliefs as prayed in the Statement of Claim (including refund of deposits with interest, damages, and declarations of fraud/breach). The Court of Appeal found the JC erred by confining misrepresentation to a single act gnoring the pleaded series of deceptions under s. 17 and s. 18 Contracts Act 1950:

(a) false claims that land owners agreed to sell (negotiations collapsed by 7 December 2011, per subpoenaed witness PW1);

(b) misrepresented price (RM15.5 psf inflated to RM18 psf);

(c) promise of 7-8% interest on deposits (never paid);

(d) urgency for payments to “secure” deal despite no progress;

(e) D1’s authority to sell without owner agreements; and

(f) stakeholder status of funds (dissipated to unrelated parties, e.g., RM3.57 million to D2’s office, without records).

These induced the SPA and payments, meeting elements of fraudulent misrepresentation (false statements knowingly/recklessly made, intent to induce, reliance, damage).

The JC misapplied parol evidence rule and failed to draw adverse inference from D3/D4’s lack of documentation. The Settlement Agreement was a sham extension of fraud, not a genuine resolution, as revival demands (e.g., RM6 million) were pretextual, and termination lacked basis. D2/D3 owed fiduciary duty via implied retainer (pre-SPA advice, handling RM8.2 million), breaching trust by improper dissipation; D4 liable for dishonest assistance in conspiracy. No total failure of consideration issue entertained (unpleaded). Limitation under s. 29 Limitation Act 1953 ran from fraud discovery (post-Settlement).

Key Takeaways

1. Series of Misrepresentations Constitute Fraud: A single disclosure (e.g., in SPA recital) does not negate cumulative deceptions; courts assess the overall inducement under ss. 17-18 Contracts Act 1950, including false assurances on deal status, pricing, interest, and fund handling.
2. Solicitors’ Duties and Implied Retainer: Handling client funds and providing advice pre-formal engagement can create fiduciary obligations; improper dissipation (e.g., to unrelated parties) breaches trust, regardless of stakeholder labels.
3. Settlement Agreements as Shams: If part of ongoing fraud, settlements can be voided if discovery occurs later; limitation periods start from fraud detection under s. 29 Limitation Act 1953.
4. Evidential Burden and Money Trail: Follow the funds—courts emphasize tracing payments; subpoenaed neutral witnesses (e.g., land owners’ lawyers) can shift burdens without calling principals.

#PropertyLaw #RealEstate #Conveyancing #Fraud #Misrepresentation #MalaysianCourts