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ILLEGALITY OF UNREGISTERED ESTATE AGENTS’ CLAIM – FINDER’S FEES AND ILLEGALITY: COURT DRAWS THE LINE ON UNREGISTERED ESTATE AGENTS

Summary and Facts
In Kunci Semangat Sdn Bhd v Thomas Varkki a/l MV Varkki & Anor [2022] 3 MLJ 857, the plaintiffs located a suitable property and negotiated a suitable price for the defendant. In return, the defendant promised to pay a finder’s fee. Due to the defendant’s failure to clear the balance sum, the plaintiff sued the defendant. The defendant counterclaimed that the plaintiffs had misrepresented the value and physical characteristics of the land. Moreover, the defendant, in post-trial written submissions, alleged that the plaintiffs’ claim was tainted with illegality. However, the issue of illegality was not pleaded in the defence. The High Court allowed the plaintiffs’ claim and dismissed the defendant’s counterclaim, which led to the present appeal.

Legal issues
i. Whether the estate agents’ claim was prohibited by provisions of the Valuers, Appraisers, Estate Agents and Property Managers Act 1981?
ii. Whether the estate agent’s claim was tainted with illegality?
iii. Whether the estate agents engaged in estate agency practice?

Court Findings

  • It was trite law that parties shall be bound by their pleadings. In this case, neither the elements of illegality nor the unlawfulness of the claim were pleaded by the defendant. The dismissal is more on technical ground.
  • Although illegality that was ex facie must be regarded by the court, it was for the defendant to plead the elements to maintain their defence.
  • To trigger the Act, the illegality has to be proven on the balance of probabilities i.e. the plaintiffs were engaged in an estate agency practice, relationship, or there was a system of estate agency.
  • The Court of Appeal (“COA”) emphasized the importance of proving the substantial elements of unlawful or illegal conduct. It would be unjust to allow an unpleaded issue of illegality to be considered. In fact, there was no evidence of estate agency practice found by the judicial commissioner and there was no objection from the defendant.

Practical Implications
The Kunci Semangat case highlighted Order 18 rule 8 of the Rules of Court when dealing with illegality. The facts giving rise to illegality must be pleaded. Considering the COA’s decision in Matad and The Eng Peng, the Act will not come into effect unless the facts are proven on the balance of probabilities. The party who asserts bears the burden of proof.

Reference Case

  • Kunci Semangat Sdn Bhd v Thomas Varkki a/l MV Varkki & Anor [2022] 3 MLJ 857
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