When a Property Agent Acts Against His Client: Lessons from a Malaysian Court of Appeal Decision
A recent decision of the our Court of Appeal provides an important reminder to landowners, property agents and purchasers about the consequences of a disputed property transaction — particularly where a private caveat is lodged over land and the parties later disagree about whether a binding sale and purchase agreement ever existed.
The case involved the proposed sale of approximately 22.06 hectares of agricultural land in Plentong, Johor Bahru, owned by Firwas Sdn Bhd. The dispute eventually resulted in litigation before the High Court and, subsequently, two appeals before the Court of Appeal.
The decision is particularly significant because it addresses several practical issues which can arise in property transactions:
- When does a proposed property sale become a binding contract?
- What happens when a purchaser lodges a private caveat but the alleged sale is ultimately found not to have been concluded?
- Can a person be liable for losses caused by a caveat even though he did not personally lodge it?
- What duties does a property agent owe to his client?
- Can an earlier unsuccessful application to remove a caveat prevent a later claim for damages?
- Can losses continue to accumulate while an appeal is pending?
What happened in the case?
Firwas Sdn Bhd was the registered owner of the land. In early 2017, Firwas appointed Thevandran K. Ragavan, trading as Thevan Realty, as its property agent to market the land.
In early 2018, discussions took place concerning a proposed sale to Siva Kumar Jeyapalan. The proposed consideration was said to be RM60 million, payable in three stages.
A Temporary Receipt was subsequently signed. Importantly, the document stated “Subject to Contract” and recorded a purchase price of RM40 million for the first two tranches, together with an earnest deposit of RM1.2 million. It also contemplated the execution of a formal sale and purchase agreement, subject to mutually agreed terms.
Although solicitors were subsequently involved and drafts of the sale and purchase agreement were exchanged, no formal SPA was ever approved and executed by Firwas.
The situation became more complicated when Firwas lost confidence in the negotiations and began pursuing an alternative purchaser, Eastern Titan Sdn Bhd. Eastern Titan had previously made an offer for the land and subsequently issued a cheque for RM5.8 million as an initial deposit.
A dispute then arose over whether there was already a binding agreement between Firwas and Siva.
Siva eventually asserted that there was a concluded agreement and lodged a private caveat over the land.
That caveat had significant consequences because it prevented Firwas from proceeding freely with its proposed transaction with Eastern Titan.
The first important lesson: a document does not automatically create a binding property sale
One of the central issues before the Court of Appeal was whether the parties had actually entered into a concluded contract for the sale of the land.
The Court reaffirmed the basic principle that a binding contract generally requires, among other things, offer, acceptance, consideration, certainty of terms and an intention to create legal relations.
In this case, the Court ultimately upheld the finding that there was no concluded agreement between Firwas and Siva for the sale of the land.
This distinction is important.
Parties may negotiate extensively. They may exchange drafts. They may even sign preliminary documents and pay money.
But that does not necessarily mean that a legally binding sale and purchase agreement has been concluded.
Here, the Temporary Receipt itself stated that it was “Subject to Contract”, while a formal SPA was still contemplated. The subsequent drafts were also not formally approved by Firwas.
For landowners and purchasers, this is a useful reminder that the exact wording and surrounding circumstances of transaction documents can be extremely important.
The second important lesson: a private caveat is not a substitute for having a genuine legal interest
The Court also considered whether Siva had been entitled to lodge the private caveat.
The answer was no.
The Court found that because there had been no concluded contract, Siva did not have the necessary caveatable interest arising from the alleged sale.
An interesting aspect of the case was that an earlier application to remove the caveat had been dismissed.
Siva argued that this earlier dismissal effectively established that he had a valid interest capable of supporting the caveat.
The Court rejected that argument.
An application to remove a caveat at an interlocutory stage is not the same as a full trial. At the earlier stage, the question was essentially whether there was a reasonably arguable basis for the claimed interest. It was not a final determination that the claimed interest actually existed.
The Court therefore held that the earlier dismissal did not prevent the Court from subsequently deciding, after a full trial, that the caveat had been wrongfully lodged.
More importantly, the Court explained that a caveatable interest must exist when the caveat is lodged. A later finding that the underlying agreement never existed cannot retrospectively create that interest.
The third lesson: property agents owe serious duties to their clients
Perhaps the most significant aspect of the judgment concerns the position of Thevan, the property agent.
A property agent is not simply a person who introduces a purchaser and collects a commission.
Where a fiduciary relationship exists, the agent owes important duties to his principal, including loyalty, full and candid disclosure of material information and acting within the authority given by the client.
The Court found that Thevan had breached those duties.
Among other things, the Court found that he had instructed the preparation of conveyancing documents based on a RM40 million purchase price even though he knew Firwas had terminated the negotiations.
He subsequently took the position that a concluded RM40 million contract already existed, despite his knowledge concerning the wider RM60 million transaction structure.
The Court considered this conduct inconsistent with the loyalty that he owed to Firwas as its property agent.
The Court also rejected Thevan’s claim for commission.
His entitlement to commission depended on the execution of the SPA, but no such SPA had been executed by both parties. The Court therefore affirmed the dismissal of his counterclaim for commission.
Does terminating the agency relationship automatically end the agent’s duties?
Thevan argued that his agency had been terminated on 18 June 2018 and that his fiduciary obligations therefore no longer applied to conduct occurring after that date.
The Court disagreed.
The Court found that, in the circumstances, the fiduciary obligations relating to the transaction continued because the conduct in question remained closely connected to the very property transaction for which Thevan had originally been engaged.
The Court concluded that his fiduciary obligations persisted during the relevant period and that the breaches identified were breaches of a subsisting fiduciary duty.
This is an important point for property owners.
Simply ending an agent’s appointment does not necessarily mean that every obligation arising from the agent’s involvement in an existing transaction immediately disappears.
The precise nature of the relationship, the transaction and the conduct in question will matter.
Can an agent be liable for damage caused by someone else’s caveat?
This was another significant issue.
Thevan did not personally lodge Siva’s caveat. Nevertheless, the Court found that his breach of fiduciary duty could independently make him liable for losses arising from the wrongful caveat.
The Court explained that equitable compensation for breach of fiduciary duty is concerned with the loss flowing from the breach and is not confined by the same foreseeability rules applicable to ordinary contractual or tortious damages.
In this case, the Court found that the wrongful caveat was sufficiently connected to Thevan’s breach of fiduciary duty.
In practical terms, the Court was not prepared to allow a fiduciary to avoid responsibility simply because another person was the immediate actor who lodged the caveat.
The financial consequences were substantial
The original High Court had awarded RM14,244,169.50 in general damages, calculated at 8% per annum on RM52.2 million for the relevant period. The High Court had also imposed other monetary orders and costs.
The Court of Appeal subsequently allowed Firwas’s cross-appeal concerning the period for calculating the continuing loss.
The Court held that the damages were to be recalculated at 8% per annum on RM52.2 million from 22 September 2020 until the date of the Court of Appeal’s judgment.
The Court also explained that Siva’s unsuccessful application for a stay had resulted in an undertaking which prevented Firwas from completing the Eastern Titan transaction while the appeal was pending.
The fact that Firwas had given the undertaking did not break the causal connection between Siva’s conduct and the continuing loss.
The Court therefore treated the continuing financial deprivation as part of the loss attributable to Siva during that period.
What happened to the fraud findings?
There is an important nuance in the Court of Appeal’s decision.
The Court set aside the findings of fraud and conspiracy made against Siva, Thevan and Usha.
The reason was not that the Court had found the underlying conduct acceptable. Rather, the Court held that fraud and conspiracy had not been properly pleaded against the relevant defendants with the required particularity.
The Court stressed that parties are bound by their pleadings. A defendant must know the case he or she is required to answer. Where fraud is alleged, the Rules of Court 2012 require particularity in the pleading of the alleged fraud.
The Court therefore set aside those findings because the case could not properly be decided on unpleaded causes of action.
However, this did not mean that the evidence concerning the conduct became irrelevant.
The Court expressly recognised that the same evidence could remain relevant to the properly pleaded claim for breach of fiduciary duty.
This distinction is particularly important in civil litigation: evidence may be relevant to one pleaded cause of action without being sufficient to establish a different cause of action that was never properly pleaded.
What was the final outcome?
The Court of Appeal partly allowed Siva and Ammsa’s appeal on the pleading issue, but dismissed their challenge to the finding that there was no concluded sale agreement.
The Court therefore upheld, among other things:
- there was no concluded agreement between Firwas and Siva for the sale of the land;
- Firwas was entitled to sell the land to Eastern Titan;
- the private caveat was wrongfully lodged;
- Siva was liable for RM100,000 in exemplary damages;
- the relevant damages were to continue to be calculated at 8% per annum on RM52.2 million for the extended period; and
- Siva and Ammsa were ordered to pay RM80,000 in costs for Appeal 144.
Thevan’s appeal was dismissed.
His liability for the relevant equitable compensation arising from his breach of fiduciary duty was upheld, subject to the Court’s specific allocation of liability for the later undertaking period. The Court also ordered RM100,000 in aggravated damages against him and affirmed the payment of the RM1.2 million earnest deposit towards the judgment debt.
Why this case matters to property owners and businesses
The case demonstrates that property disputes can become considerably more complicated when negotiations break down after substantial documentation and money have already changed hands.
For property owners, the case highlights the importance of clearly documenting whether negotiations are still subject to contract and carefully controlling the authority given to agents and representatives.
For purchasers, it demonstrates the risks of asserting a contractual interest in land before ensuring that the underlying agreement is legally binding.
For property agents, the case is a reminder that acting for a client carries serious obligations of loyalty and good faith. An agent’s commercial interest in completing a transaction does not override the interests of the principal.
And for anyone involved in a dispute concerning a private caveat, the case demonstrates why the legal basis for the caveat should be examined carefully from the outset. A caveat may have significant commercial consequences, particularly where it prevents a landowner from completing another transaction.
Why specialist legal advice matters in property disputes
Property disputes involving contracts, private caveats, agents, fiduciary duties and substantial financial losses can quickly become complex.
The case also illustrates an equally important litigation lesson: the way a case is pleaded can be just as important as the evidence itself. The Court of Appeal’s decision to set aside the fraud and conspiracy findings demonstrates the importance of identifying and properly pleading the precise causes of action relied upon.
At JY Ko Advocates & Solicitors, we assist clients in Malaysia with complex commercial and property disputes, including contractual disputes, land and property litigation, private caveat matters, breach of fiduciary duty claims and recovery of substantial losses.
If you are a landowner, purchaser, company, property agent or business involved in a dispute concerning a property transaction, obtaining legal advice at an early stage can help identify the available remedies and, equally importantly, prevent procedural or pleading issues from undermining an otherwise strong case.
For legal advice on property disputes, private caveats, contractual disputes and commercial litigation in Malaysia, contact us now!
Written on: 13th September 2026, Sunday
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Disclaimer: The above proposition is subject to actual facts and circumstances and shall never be referred as the actual law without seeking legal advice. Consult us for more information!