Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong And Another Appeal [2025] MLJU 3155

The case of Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong And Another Appeal [2025] MLJU 3155 has committed a significant departure from the Berjaya Times Square Sdn Bhd v M Concept Sdn Bhd [2010] 1 MLJ 5971. The Federal Court has declared this case to be no longer good law, as the doctrine of total failure of consideration (TFC) cannot be fused with restitution or breach; it must be perceived as a restitutional remedy. 

Court Name & Bench 

Court Name: Federal Court, Putrajaya, Malaysia. 

Name of judges: Abdul Rahman Sebli CJ (Sabah and Sarawak), Zabariah Mohd Yusof, Rhodzariah Bujang, Abdul Karim Abdul Jalil, and Ahmad Terrirudin Mohd Salleh FCJJ. 

Facts 

The parties involved in this case are the plaintiffs (Lim Swee Choo) and the Defendant (Ong Koh Hou @ Won Kok Fong), along with a third party, a land developer, DA Land Sdn Bhd (“DA Land”). The plaintiffs entered into a sale and purchase agreement (SPA) with DA Land to purchase 4 vacant parcels of land in Rawang, Selangor (Rawang 4) for RM23,000,000.00. Both parties were aware that one piece of land was burdened by a private caveat lodged by a Ho Fook Cheoy (Ho’s caveat). 

The plaintiffs assigned all their rights and interests to the Defendant through an Assignment Agreement and an undated Supplemental Assignment Agreement. The defendants paid RM23,000,000.00 to the Plaintiffs. The Plaintiffs assigned their rights absolutely and were obligated to transfer the land rights to the defendant free from claims, caveats, and encumbrances. The Plaintiff’s original SPA disclosing Ho’s caveat was deposited with the Defendant’s solicitors. 

The defendant then entered into a new SPA with DA land to purchase 3 lots of Rawang 4 for RM84,000,000.00. The RM25,500,000.00 consideration paid under the Assignment Agreement was declared as the deposit for this new SPA. When the defendant failed to pay the balance price under the new SPA, DA Land terminated the contract and forfeited the RM23,000,000.00 deposit. The plaintiffs sought a declaration that the defendant had breached the Assignment Agreement. 

Legal Issues 

1. Whether TFC, as an equitable doctrine, could be invoked by the Respondent to recover from the Applicants a sum of RM23,000,000.00, which sum had previously been declared by the High Court in a related suit as non-recoverable because it comprised part of an illegal moneylending transaction engaged in by the Respondent and in which proceedings the Respondent was declared as an unlicensed moneylender? 
2. Whether TFC, as an equitable doctrine, could be invoked by the Respondent to recover a sum of RM23,000,000.00 from the Applicants when the High Court held the Respondent in the present case as the party who had caused the loss, and on which “loss” he had based his claim of a total failure of consideration? 
3. Whether TFC could apply where there has been performance or part-performance of the contract, which in this case was the assignment of a sale agreement by the Applicants to the Respondent, pursuant to which the Respondent made part-payment thereof and received the benefit of the assignment? 
4. Whether the true test of TFC is as stated by the House of Lords in Stocznia Gdanska SA v. Latvian Shipping Co. (1998) 1 WLR 574 of “whether the promisor has performed any part of the contractual duties in respect of which payment is due”2 and not the test of “whether the party in default has failed to perform his promise in its entirety3” as stipulated by the Federal Court in Berjaya Times Square Sdn. Bhd. v. M Concept Sdn. Bhd. [2010] 1 MLJ 597? 
5. Whether the case of Berjaya Times Square has wrongfully conflated the right of rescission of a contract with the right to seek restitution of monies paid and received (which is independent of rescission or termination of a contract) and is therefore not truly classifiable as an authority for the doctrine of restitution based on a total failure of consideration? 
6. Whether on its true principle, the doctrine of TFC has no application where there has been only a partial failure of performance or the claimant has derived some benefit from the contract so that he is restricted to an action in damages for breach of contract as opposed to restitution? 

Judgement/ Final Decision 

The appeals of the appellants were allowed. The court held that the doctrine of total failure of consideration (TFC) only concerns restitutionary relief. Sections 40 and 56 of the Contracts Act 1950 cannot be used together in applying TFC4. This is because TFC is applicable after the termination of the contract. The Berjaya Times Square is, in fact, not a good law as it merges TFC principles to fit in Section 40 requirements. The test in determining the breach of contract must be based on whether there were terms of the contract breached and not based on the failure to fulfill a promise. 

Legal Reasoning / Ratio Decidendi 

TFC can be invoked for restitutionary relief purposes. It can be invoked when an innocent party seeks recovery of monies paid and not in claim of damages for breach. Claims for restitution under this doctrine can be denied when there has been any performance of a contractual duty. 

1. TFC cannot be raised under illegality and unconscionable conduct

• The Assignment Agreement and undated Supplemental Assignment Agreement entered into between the Plaintiffs and Defendant were valid and enforceable,  which gives no room for restitution. The SPA between DA Land and the Defendants was tainted with illegality as the Defendant was found to be an unlicensed moneylender. Illegality cannot be invoked to recover the sum of money, as the court ought not to be seen as lending its aid to illegality. 
• Since the SPA between DA Land and Defendants was done without the knowledge of the Plaintiffs, the Defendants attempted to invoke a new cause of action to recover the sum of money. It is unconscionable for the Defendants to claim for restitution on monies that they themselves have not paid yet. 

2. TFC cannot be invoked when there’s a performance or partial performance, or partial failure of performance 

• TFC cannot be invoked when there has been a complete or partial performance or when there has been partial failure of the performance. If such performances result in the innocent party receiving any benefit, there is no TFC. Recovery of payment can be made when there is a complete or total failure of consideration, where one of the contracting parties fails to receive a benefit or consideration from the contract. 
• The Plaintiffs had performed their contractual duties by assigning their rights, title, and interest to the Defendants during the SPA. As a result, the Defendants enjoy the benefits but use them for illegal reasons. Since the Plaintiffs had performed their contractual duties, TFC cannot be invoked. 

3. The True Test and Scope of TFC 

• TFC must be applied prospectively. 
• The Berjaya Times Square is not a good law as it focuses on whether the defaulting party has completely failed to perform their promise. 
• The correct test for TFC is established in the Stocznia Gdanska case, which examines whether the promisor has fulfilled any portion of the contractual obligations for which payment is due5. 
• Consideration under TFC refers to the expected performance of contractual duties rather than the mere promise itself. 

Conclusion 

The significance of the Lim Swee Choo case has ended the debate on the determination of restitution based on the Berjaya Times Square case. Future judicial precedents are able to differentiate what constitutes a breach of a contract, when a claim of restitution can be made, and when restitutionary remedies are applicable. These three claims cannot be fused altogether but are claimable on a cause of action on their own. The answers of scholars on the views of Berjaya Times have now been answered. This results in the law of contract to become more clearer for Malaysian courts in cases of termination or rescission. 

REFERENCE(S):

Berjaya Times Square Sdn. Bhd. v. M Concept Sdn. Bhd. [2010] 1 MLJ 597 Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong And Another Appeal [2025] MLJU 3155 

Stocznia Gdanska SA v. Latvian Shipping Co. (1998) 1 WLR 574

1 Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong And Another Appeal [2025] MLJU 3155 [165]

2 Stocznia Gdanska SA v. Latvian Shipping Co. (1998) 1 WLR 574 [588]

3 Berjaya Times Square Sdn. Bhd. v. M Concept Sdn. Bhd. [2010] 1 MLJ 597 [609] 

4 Lim Swee Choo (n-2) [63]

5Ibid [159]