Malaysia - Ang Ming Lee v Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan.
Legal News & Analysis - Asia Pacific - Malaysia - Dispute Resolution
2 January, 2020
Ang Ming Lee v Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan1
By a Sale and Purchase Agreement (“SPA”) dated 3 May 2012 between BHL Construction Sdn Bhd (“Developer”) and the purchasers of units in Sri Istana Condominium (“Units”), it was agreed that vacant possession of the Units shall be delivered within 36 months from the date of signing the SPAs.
The SPAs were in the form prescribed by Schedule H of the Housing Development (Control and Licensing) Regulations 1989 (“Regulations”). According to subparagraph 25(2) of Schedule H, a developer is liable to pay liquidated damages (“LAD”) to a purchaser if the developer fails to deliver vacant possession within 36 months.
By a letter dated 20 October 2014 to the Controller of Housing (“Controller”), the Developer applied for an extension of time to deliver vacant possession under Regulation 11(3), which states as follows:
“Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive or modify such provisions … ”
By a letter dated 24 October 2014, the Controller rejected the Developer’s application.
By a letter dated 28 October 2014, the Developer appealed to the Minister of Urban Wellbeing, Housing and Local Government (“Minister”) against the rejection pursuant to Regulation 12, which states as follows:
“Notwithstanding anything to the contrary in these Regulations, any person aggrieved by the decision of the Controller … may, within fourteen (14) days after having been notified of the decision of the Controller, appeal against such decision to the Minister; and the decision of the Minister made thereon shall be final and shall not be questioned in any court.”
By a letter dated 17 November 2015 (“Letter”) signed on behalf of the Controller, an extension of 12 months was granted to the Developer (“Decision”). As a result of this, the purchasers were unable to claim LAD as the Developer had 48 months to deliver vacant possession of the Units instead of the statutorily prescribed 36 months.
Decision of the High Court
The purchasers filed a judicial review application against the Minister, the Controller and the Developer in respect of the Decision.
In allowing the application the High Court held, amongst others, as follows:
- The Controller has no power to waive or modify the prescribed contract of sale under Regulation 11(3) and extinguish the rights of the purchasers to claim LAD.
- The rights of the purchasers to claim LAD in the event of delay will be adversely affected or even extinguished. As such, they should have been given a right to be heard before the Decision.
- Regulation 11(3) is ultra vires the Housing Development (Control and Licensing) Act 1966 (“Act”).
- The Act is a piece of social legislation intended to protect the interest of purchasers.
- The Decision is null and void.
Dissatisfied with the decision of the High Court, the Developer appealed to the Court of Appeal.
Decision of the Court of Appeal
The Court of Appeal held that Regulation 11(3) is not ultra vires the Act, and thus set aside that part of the High Court’s decision.
However, the Court of Appeal affirmed that part of the High Court’s decision which held that the Decision is null and void, for the following reasons:
- There was no indication in the Letter that the Decision was conveyed on behalf of the Minister, or that the signatory was acting on the authority of the Minister. Therefore, the Decision was made without jurisdiction and was ultra vires the Act.
- The rights of the purchasers to claim damages in the event of delay would be adversely affected or even extinguished. As such, they should have been given a right to be heard before the Decision was made.
- The Developer and the purchasers applied for leave to appeal to the Federal Court against the decision of the Court of Appeal and their applications were allowed.
Decision of the Federal Court
In allowing the purchasers’ appeal and dismissing the Developer’s appeal, the Federal Court held as follows:
- The Act is a social legislation designed to protect home buyers, and the interests of purchasers are the paramount consideration. Parliament has entrusted the Minister with the task of safeguarding the interests of purchasers and the Minister has accordingly prescribed the terms in Schedule H.
- Section 24 does not confer power on the Minister to make regulations to delegate the power to waive or modify the terms in Schedule H to the Controller. The duty to safeguard the interests of the purchasers may not be delegated by the Minister to some other authority.
- The Controller does not have the power to waive or modify the terms in Schedule H.
- Regulation 11(3) is ultra vires the Act.
- The Decision was not valid, as the Letter was signed by an individual on behalf of the Controller and not on behalf of the Minister. Therefore, the Decision was that of the Controller and not the Minister.
The decision of the Federal Court is a timely reminder that the Act exists to protect the interests of purchasers, and that the Minister is entrusted with this task.
However, the Federal Court did not confine its decision to pending or future decisions by the Controller. Therefore, since a decision is “retrospective in effect unless a specific direction of prospectivity is expressed”2, the Federal Court’s decision, on its face, has retrospective effect. Hence, previous decisions made by the Controller under Regulation 11(3) may well be open to challenge.
It also remains to be seen whether the Minister will still be able to grant extensions of time to developers and, if so, the scope of that power. There are no provisions in the Act or Regulations which specifically empower the Minister to grant such extensions. While the Federal Court made it clear that the Minister has to safeguard the interests of purchasers, the issue of the Minister’s power to grant an extension and the scope of that power were not specifically discussed.
Until further judicial clarity is provided, developers are likely to see an increase in LAD claims by purchasers.
For further information, please contact:
Sivabalah Nadarajah, Partner, Shearn Delamore & Co