Case Breakdown · Malaysia
The RM23 million deal that rewrote contract law.
A tangled land assignment, a buyer who was the architect of his own loss — and the end of a precedent Malaysian lawyers had cited for fifteen years.
Settled lawTwo sellers bought four plots of Rawang land for RM23 million and assigned the whole of their interest to a buyer for RM25.5 million. Part of the price was never to be paid in cash at all: RM2.5 million was to be treated as the sellers' own investment in the land, representing 4.5 per cent of its value.
Without telling them, the buyer then struck his own RM84 million deal with the developer for three of the same four plots — using the sellers' RM23 million as his deposit. That deal collapsed. The High Court in separate proceedings held it to be an illegal moneylending transaction and the deposit was forfeited.
So he sued the sellers for the RM23 million back.
How the courts split
The High Court dismissed both the sellers' claim for their RM2.5 million and the buyer's counterclaim.
The Court of Appeal went further. It upheld the dismissal of the sellers' claim but allowed the counterclaim, ordering them to refund RM23 million on the basis that there had been a total failure of consideration — relying on Berjaya Times Square.
The Federal Court, sitting five, unanimously allowed the sellers' appeals.
There was no total failure
The sellers had assigned everything they had: their rights, title and interest in the land and in the sale and purchase agreement, with the developer's knowledge and consent. That assignment was the consideration for the RM25.5 million.
The buyer had taken the benefit of it — it let him deal directly with the developer, and it let him apply the sellers' RM23 million as his own deposit. On those facts the Court held the sellers “had done everything on their part” and completed performance according to the contracts' terms [151]. There was performance, the buyer had derived benefit from it, and so the Court of Appeal's finding of total failure could not stand.
There was also a more basic obstacle. All three courts had found the assignment agreements valid and enforceable — and where a contract remains valid and binding, the parties' rights are governed by its terms.
The assignment agreement remains valid and binding, governing the rights and liabilities of the parties under its terms thereby leaving no room for restitution.
Restitution addresses benefits transferred outside a subsisting contract. While the contract still stands and still allocates the parties' rights, there is nothing for restitution to do.
The doctrinal reset
Having disposed of the appeal, the Court turned to the authority the courts below had relied on — and found the problem ran deeper than its application.
Berjaya Times Square had, in the Federal Court's analysis, “conflated the right to terminate a contract for breach with the right to claim restitution, recasting both as a common law right to rescind, in order to justify reading the concept of total failure of consideration into the phrase ‘his promise in its entirety' in s 40” [66].
| Question | Berjaya (2010) | Lim Swee Choo (2025) |
|---|---|---|
| Test for total failure | Did the defaulter fail “his promise in its entirety”? | Did the promisor perform any part of the duties for which payment was due? |
| Termination vs restitution | Conflated into a single “right to rescind” | Separate and independent causes of action |
| Role in s 40 Contracts Act | Read into “promise in its entirety” | None — s 40 concerns repudiation only |
| Status | No longer good law on this point | The governing test |
The new test comes from Lord Goff in Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574: the question is “whether the promisor has performed any part of the contractual duties in respect of which payment is due.”
Two questions, kept apart
The Court was explicit that the right to terminate for repudiation under s 40 of the Contracts Act 1950 “does not depend on the question whether there is a total failure of consideration.” The test there is whether the defaulting party's actions would lead a reasonable person to conclude that he no longer intends to be bound [74].
Only once termination is resolved does it become relevant to ask whether the innocent party may sue in restitution for money had and received — and only there does total failure of consideration belong [75].
Upon careful analysis and anxious reflection, we are of the considered view that Berjaya Times Square can no longer be regarded as good law.
The 2010 Times Square shop-lot case: a late-delivery dispute in which the Federal Court read total failure of consideration into s 40. It framed how Malaysian courts approached these claims for fifteen years.
What the case stands for
- Terminating for breach and claiming money back are two different actions. Never mix the tests.
- Total failure asks what was performed — not whether the promise failed “in its entirety”.
- A valid subsisting contract leaves no room for restitution, and unconscionable conduct defeats an equitable claim in any event.
- Allege illegality and you must prove it — s 103 Evidence Act 1950.
References
Legislation
- Contracts Act 1950, ss 40, 56, 66, 71
- Evidence Act 1950, s 103 · Moneylenders Act 1951
Judgments
- Lim Swee Choo & Anor v Ong Koh Hou @ Won Kok Fong and another appeal [2025] 6 MLJ 327 (Federal Court; Abdul Rahman Sebli CJ (Sabah and Sarawak), Zabariah Yusof, Rhodzariah Bujang, Abdul Karim and Ahmad Terrirudin FCJJ), 2 October 2025
- Berjaya Times Squares Sdn Bhd v M Concept Sdn Bhd [2010] 1 MLJ 597 (Federal Court) — no longer good law on this point
- Stocznia Gdanska SA v Latvian Shipping Co [1998] 1 WLR 574 (HL) — test adopted
Also cited
- Rasiah Munusamy v Lim Tan & Sons [1985] 2 MLJ 291 · Fibrosa v Fairbairn [1943] AC 32 · Dream Property v Atlas Housing [2015] 2 MLJ 441 · Triple Zest Trading v Applied Business Technologies [2023] 6 MLJ 818