Malaysia-effect of rescission of a sale and purchase agreement on an assignment

In the Federal Court case of RHB Bank Bhd v Travelsight (M) Sdn Bhd (No Syarikat: 50037-A) & Ors and another appeal [2014] MLJU 1467, it was held that:-

"...[1] The questions upon which leave was granted to RHB Bank Berhad to appeal in Civil Appeal 02-36-2013(W), and to Atlas Corporation Sdn Bhd (in liquidation) and liquidators, namely Taufiq Ahmad @ Ahmad Mustapha bin Ghazali and Mak Kam Choon to appeal in Civil Appeal 02-38-2013(W), against the order of the Court of Appeal in respect of the matter decided by the High Court in the exercise of its original jurisdiction, read:


RAYUAN SIVIL NO: 02(F)-36-07/2013(W)

  •  
    1. Sama ada penyerahanhak (assignment) ke semua hak, hak milik dan manfaat di dalam perjanjian jual beli tidak akan (lagi) berkesan selepas (setelah) suatu perintah bagi pembatalan perjanjian jual beli itu? 
  •  
    2. ama ada bank yang menerima suatu penyerahanhak perjanjian jual beli yang telah dibatalkan oleh suatu perintah bagi pembatalan mempunyai apa-apa hak atau obligasi kontrak untuk menyerah hak semula.Sama ada satu penerima bank (receipient bank) di bawah perjanjian jual beli yang telah dibatalkan (rescinded) oleh suatu Perintah Pembatalan (Order for Rescission) mempunyai apa-apa hak di bawah kontrak atau obligasi (contractual right or obligation) untuk menyerah hak semula (reassign); 
  •  
    Sama ada satu penerima bank (receipient bank) di bawah perjanjian jual beli yang telah dibatalkan (rescinded) oleh suatu Perintah Pembatalan (Order for Rescission) mempunyai apa-apa hak di bawah kontrak atau obligasi (contractual right or obligation) untuk menyerah hak semula (reassign); 
  • (i)
    hartanah itu (subject perjanjian jual beli itu) dan/atau; 
  • (ii)
    harta (hal perkara perjanjian jual beli); 
  • (iii)
    hak-hak milik dan manfaat di dalam perjanjian jual beli kepada pemberi serahanhak (assignee)/peminjam selepas pembayaran penuh pinjaman (loan). 

RAYUAN SIVIL NO: 02(F)-38-07/2013(W)

  • 1
    Whether an assignment of all rights, title and benefit of a sale and purchase agreement would be ineffective upon the order for the rescission of the sale and purchase agreement? 
  • 2
    Whether a recipient bank of an assignment of a sale and purchase agreement that has been rescinded by an order for rescission has any contractual right or obligation to reassign; 
  • (i)
    the property (the subject matter of the sale and purchase agreement); and/or 
  • (ii)
    the rights, title and benefit in and to the sale and purchase agreement, to the assignor/borrower upon full payment of the loan? 
....[35] We now answer the leave questions in English, which also answer the leave questions in Bahasa Malaysia, as follows:

Question 1:
An assignment of the rights, title and benefit of a sale and purchase agreement is between a purchaser/borrower and a bank, whilst the rescission of a sale and purchase agreement is between purchaser and vendor.
The assignment is the security of the bank. But that security of the bank will be lost upon a valid rescission of the sale and purchase agreement. The security may be lost. But the assignment remains, and the bank is nonetheless the assignee of the rights that will accrue to the borrower upon rescission of the sale and purchase agreement. Hence, while the order of rescission will affect the security of the bank, it will not affect the assignment nor the standing of the bank as assignee and or creditor of the borrower, or the equitable right of the bank to lay first claim to the money or property to be restituted, to discharge the outstanding loan.
Question 2:
In the instant case, where both borrower and bank had agreed to relinquish the property and what would be restituted was a refund of money, it would be unreasonable to hold the bank to reassign property. After rescission, Travelsight could not rely on the sale and purchase agreement to give it a clear title to the property, such that Travelsight could not rely on the assignment to give it that clear title (for an analogy, see Independent Trustee Services Ltd v GP Noble Trustees Ltd [2012] EWCA Civ 195 at [52]). At most, the bank could only be held to assign the proprietary right to the refund and or the rights for enforcing the same."

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