Case analysis of Pearl Streams v Beverly Heights: the CA conclusively determines that disputed documents do NOT belong in Part A

Placing disputed documents in Part A is reserved for silly puppies. In this article, I discuss the CA decision of Pearl Streams and demonstrate that case law has taken a definitive turn with regard to the classification of documents.

The facts of Pearl Stream: the Sale and Purchase Agreement

Pearl Streams (“Pearl”) was contacted by a property agent who recommended units in a condominium called Imperial Residency.

Pearl agreed to purchase 1 unit in cash. This unit was owned by Beverly Heights, a property developer (“Beverly”).

Loke Chee Min (“LCM”) was a solicitor on Beverly’s panel. He acted for Beverly on the instructions of Tong Kah Hoe (“TKH”), who was the GM of Beverly.

A S&P dated 12.09.2017 was concluded between Beverly and Pearl, with a purchase price of RM560k for the unit. Pearl issued 3 cheques to Beverly, representing the purchase price. TKH caused Beverly to issue a letter, confirming receipt of the purchase price of 560k.

The buyback clause

The S&P also contained a “buyback” option, wherein Beverly could buy back the unit for a lumpsum payment of 560k within 3 months. Beverly did not exercise this option.

Pearl then sold the unit to Thong Wai Hoong for RM800k (“TWH”). Pearl and TWH agreed to use LCM as their solicitor.

LCM wrote to Beverly to ask for information on the property. Beverly expressed shock at this sale and denied that Beverly ever sold the unit to Pearl.

The Suit in the HC

Pearl filed Suit 178 against Beverly and KV Ong (a legal firm), despite having engaged LCM. Pearly sought a refund of the 560k paid, plus a further 240k for the price they would have got had they sold the unit to TWH.

Beverly denied the sale. It maintained that TKH had no right to act for it. Beverly further counterclaimed and alleged that the entire S&P was a sham to disguise a moneylending agreement.

TKH had orchestrated the same pattern of moneylending in 3 other companies.

KV Ong and Beverly both counterclaimed against P, alleging that they were the victims of an illegal moneylending scheme by Pearl, LCM and TKH (the GM).

Findings of the HC

The HC found that the agreements were moneylending agreements. The HC also held that TKH had no authority to bind Beverly.

The CA reverses the HC’s decision

At the CA, the panel crucially scrutinised Beverly’s decision to place the S&Ps into Part A. The CA noted that the following documents were placed into Part A:

a.Salinan Perjanjian Jual Beli di antara Beverly Heights Resources Sdn Bhd dan Pearl Streams Sdn Bhd bertarikh 12 September 2017 (i.e. the SPA). 

b.Salinan DMC di antara Beverly Heights Resources Sdn Bhd dan Pearl Streams Sdn Bhd bertarikh 12 September 2017. 

c.Salinan cek-cek kepada Tetuan K.V. Ong, Chua & Partners bertarikh 12 September 2017. 

d.Salinan surat daripada Tetuan Law Office of CM Loke kepada Tetuan K.V. Ong, Chua & Partners bertarikh 20 September 2017. 

e.Salinan surat daripada Tetuan Law Office of CM Loke kepada Tetuan K.V. Ong, Chua & Partners bertarikh 5 September 2017. 

f.Email di antara Thomas TKH dan KV Ong, Chua & Partners bertajuk Imperial Residency (SPA and DMC) masing-masing bertarikh 5 September 2017 dan 29 Ogos 2017. 

g.Email di antara Loke Chee Min dan KV Ong, Chua & Partners mengenai SPA dan DMC bertarikh 5 September 2017 dan 7 September 2017. 

h.Email di antara Loke Chee Min dan KV Ong, Chua & Partners bertarikh 5 Mac 2018. 

i.Kad nama Loke Chee Min dari Tetuan Yap Loke & Loh. 

j.Salinan surat daripada Beverly Heights Resource Sdn Bhd bertarikh 11 September 2017.

The CA’s decision

The CA scrutinised the law on classification of documents (paras. 34-45). The CA noted that there was a discrepancy between the decisions of Yeo Ing King and Thiagarajan and Tiow Weng Theong. The CA then concluded that it would follow the latter decisions of Thiagarajan and Tiow Weng Theong:

[47] Having regard to the matters referred to above, we decided to follow the decision of the Court of Appeal in Tiow Weng Teong (supra) and Thiagarajan (supra). In our view, once a document is placed in Part A, the contents as well as the truth is deemed to be proved. If the parties agree to place a document in Part A, it means that the maker need not be called because the authenticity of the documents is not in dispute. If there is a dispute as to the contents and/or its truth, it has to be placed in Part B. Placing it in Part C means that the authenticity, contents, and its truth are not admitted. The maker of the document must be called, and the contents must be proved. In the present case, we find that placing the SPA, DMC, the letters, e-mails and cheques in Part A was fatal to the Defendant’s case. 

[48] We agree with the Plaintiff’s submission that if the Defendants decided to take a different stance in the trial, contradicting their placement of the document, it was a self-inflicted error of their own making. It is a profound self-contradiction that will not find favour in legal parlance. 

[49] If the learned HCJ had kept the legal principles at the forefront of her judicial analysis, then it is very likely that Her Ladyship might have come to a different conclusion. 

[50] Therefore, we find that in the circumstances, the learned HCJ erred in holding the transaction as illegal, as it was contrary to the categorisation of the document under Part A, and this has occasioned a serious miscarriage of justice that warranted appellate interference.

To ensure that it did complete justice, the CA went on to consider the evidence and held that there was no element of illegal moneylending (paras. 51-53).

The purported SD of TKH and Turquand’s Rule

TKH purportedly affirmed a Statutory Declaration (SD) before a senior member of the Bar, Mr Mathew Thomas Philip. Having assessed the SD, the CA noted that it did not refer to Pearl Streams (paras. 54-61).

The CA also noted that TKH did indeed have the necessary authority to bind Beverly (paras. 62-77) . Applying Turquand’s Rule (the Indoor Management rule), the CA held as follows:

[72]  Based on the above, we are of the view that the SPA and DMC are valid and bind the 1^st Defendant pursuant to Turquand’s Rule. (See: Royal British Bank v. Turquand [1856] 119 ER 474) 

[74]  More importantly, again, we find that parties had agreed to place SPA, DMC, emails, cheques and letters in Part A of the CABD. (See: Paragraph 28 above) 

[75]  As we have stated in paragraphs 46- 50 above, once a document is placed in Part A, the contents as well as the truth are deemed to be proved. The maker of the document, i.e. SPA (TKH), need not be called because the authenticity of the SPA is not in dispute.

Crucial takeaways 

From the above, it is clear that the placement of documents in Part A was Beverly’s undoing. This could have been avoided by circumspect handling of the PTCM documents. In a situation where one alleges that agreements and documents form the basis of an illegal transaction, I would posit that those documents ought to be placed in Part C (contents and authenticity disputed).

If one alleges that a document is a sham document, one would very clearly argue that the authenticity is disputed as the documents are not what they seem. This would warrant the same being placed in Part C.

Pearl Streams v Beverly is an excellent reminder for practitioners. To assist, I have made a little poem:

Part A is undisputed,

That much is certain,

Part B is for doubt,

Which may undermine the strongest redoubt,

Part C is false and forged,

For those of a mendacious core.

The foolish disregard,

The sage advice of the panel,

Placing it in Part A,

I say old chap, do it at your own peril.

GAVIN JAYAPAL

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