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Case Study: Always Do The Spadework

Messrs Korra and Associates (“IP”) was named as the Third Defendant in a writ filed by a Claimant who claimed that the IP was involved in a conspiracy to defeat the execution of an arbitration award against the First Defendant.

It all started when the IP acted for the Second Defendant to purchase a few properties from the First Defendant. However, it was not known to either the IP or the Second Defendant that the Claimant was awarded with damages from an arbitration proceeding between the Claimant and the First Defendant.

A few years earlier, the Claimant obtained an arbitration award of RM1,000,000 in relation to a land dispute with the First Defendant. The Claimant made an application to the High Court to enforce the arbitral award against the First Defendant and it was allowed.

However, before the Claimant could enforce the award, the First Defendant sold a few parcels of land which were not recorded in the audited accounts to the Second Defendant. The Claimant alleged that the disposal of lands will affect their ability to recover the damages under the arbitral award. The Claimant filed a writ and alleged that the First Defendant, the Second Defendant and the IP had conspired to dissipate the lands in order to defeat the arbitral award granted to the Claimant.

Note: The land which the Second Defendant purchased from the First Defendant was never part of the land dispute.

In reviewing the IP’s risk management processes to determine if their original Base Excess should be reinstated, the Insurer found the following:
 
  • The checklist employed by the IP for their conveyancing files were very comprehensive and in accordance with the basic conveyancing checklist suggested by Bar Council.
  • The checklist included critical timelines such as date of the SPA, completion date of the SPA, submission of real property gains tax returns with the Inland Revenue Board, payment of the differential sum for the purchaser, receipt of the redemption statement from the Vendor’s financier, release of the redemption sum to the Vendor’s financier, release of the loan sum by the Purchaser’s financier and payment of the balance purchase price to the Vendor.
  • From the checklists, the Insurer was able to ascertain that the IP was diligent and cautious in the manner they had handled the transaction since the IP kept track of crucial dates and processes.