Section 24 of the Housing Development (Control and Licensing) Act 1966 [“HDA 1966”] empowers the Minister of Housing and Local Government to make regulations for the purpose of carrying into effect the provisions of the HDA 1966.
Pursuant to Section 24 of the HDA 1966, the Minister introduced the Housing Development (Control and Licensing) Regulations 1989 [“HDR 1989”] which came into force on 1st April 1989.
Clause 22(3) of Schedule G to the HDR 1989 states:
“For the avoidance of doubt, any cause of action to claim liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser takes vacant possession of the said Building.” (underline mine)
Clause 25(3) of Schedule H to the HDR 1989 provides the following:
“For the avoidance of doubt, any cause of action to claim liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser takes vacant possession of the said Parcel.” (underline mine)
Both clauses were first introduced by way of the Housing Developers (Control and Licensing) (Amendment) Regulations 2002 [PU(A) 473/2002].[1] Subsequently, when the Housing Developers (Control and Licensing) (Amendment) Regulations 2007 [PU(A) 395/2007] was introduced, both clauses remained in Schedules G and H of the HDR 1989 respectively.
The Minister’s intention in introducing Clause 22(3) of Schedule G and/or Clause 25(3) of Schedule H to the HDR 1989 may have been noble, namely to prevent limitation from setting in[2] and barring claims for liquidated damages from purchasers.
However, a plain reading of both clauses results in an undesirable scenario whereby purchasers are unable to bring a civil suit against the developer for liquidated damages until and unless they have received vacant possession.
Assuming a developer is x years late and vacant possession has not yet been delivered to the purchasers, a civil suit by a purchaser against the developer would be legally premature and could possibly be struck out e.g. for lack of a reasonable cause of action.
Unscrupulous developers would be better off not completing the housing development rather than completing it late.
This would undoubtedly defeat the intention of Parliament (in relation to the HDA 1966) and the Minister (in relation to the HDR 1989) in enacting such social legislation for the protection of the purchasers.[3]
Some of the options considered to avoid the above undesirable scenario include the parties’ modification, sidestepping the clauses, and the controller’s modification.
Parties’ modification
The courts have always recognised the doctrine of freedom of contract as being applicable in Malaysian jurisprudence.[4]
As such, even in housing development contracts of sale, parties are arguably free to vary or modify when a cause of action for breach of contract accrues so long as the variation or modification is in favour of the purchaser.[5]
In Insun Development Sdn Bhd v Azali bin Bakar [1996] 2 MLJ 188, a case on Schedule E of the Housing Developers (Control and Licensing) Regulations 1982,[6] the Federal Court held:
“The crucial question is: regard being had to the provisions of cl 18 of the agreement, when did the purchaser’s right to sue for the agreed liquidated damages for the delay accrue?
It is clear law that in the absence of express contractual provision, the purchaser’s right to sue for damages would accrue on the date of the breach of contract (see Nasri v Mesah [1971] 1 MLJ 32 at p 34; Reeves v Butcher [1891] 2 QB 509 at p 511; Gibbs v Guild (1881–1882) 8 QBD 296 at p 302). But, the parties to a contract are free to regulate or modify their rights in the event of breach thereof in such a manner as to postpone the date of accrual of their right to sue for damages which, of course, was what had happened in Loh Wai Lian.”[7] (underline mine)
More recently, the Federal Court in The Pacific Bank Bhd (sued as guarantor) v Kerajaan Negeri Sarawak [2014] 6 MLJ 153 explicitly stated:
“It is commonplace for parties to a contract to regulate or modify their rights in the event of breach and the rights of accrual of any cause of action in any way they deem fit. This trite principle is best illustrated in the Privy Council decision of Loh Wai Lian v SEA Housing Corporation Sdn Bhd [1987] 2 MLJ 1, which was approved by the Federal Court in Insun Development v Azali bin Bakar [1996] 2 MLJ 188 and subsequently in the Court of Appeal case of NVJ Menon v The Great Eastern Life Assurance Co Ltd [2004] 3 MLJ 38.”[8] (underline mine)
In theory, parties could arguably modify or vary Clause 22(3) of Schedule G and/or Clause 25(3) of Schedule H to the HDR 1989 to determine that the cause of action for liquidated damages would accrue upon the expiry of the due date for the delivery of vacant possession.
However, realistically and due to the inequality in bargaining power,[9] developers are unlikely to agree to such a modification or variation as it would be disadvantageous to them.
Sidestepping the clauses
In Ganda Selat Sdn Bhd v Mohammadi bin Mt Abu @ Ramli & Ors [2019] MLJU 1651, Noorin binti Badaruddin J was faced with the issue of Clause 26(3) of Schedule H to the HDR 1989 [presently Clause 25(3) of Schedule H to the HDR 1989] potentially causing a purchaser’s claim for liquidated damages to be premature.[10]
Her Ladyship relied on the Court of Appeal’s decision in Balbeer Singh Karam Singh & Ors v Sentul Raya Sdn Bhd [2014] 7 CLJ 461 [“Balbeer Singh”] and the High Court’s decision in Tai Kim Yew & Ors v Sentul Raya Sdn Bhd [2004] 3 CLJ 310 [“Tai Kim Yew”] to sidestep Clause 26(3) of Schedule H to the HDR 1989:
“It is true that in the instant case, unlike the case of Tai Kim Yew & ors (supra) clause 26(2) of the SPAs herein does not provide for the LAD to be paid immediately upon the delay in handing over the vacant possession. However, the important principle in both Balbeer Singh and Tai Kim Yew & Ors (supra) is that the Court recognised the claim for the LAD and as stated earlier in Balbeer Singh the LAD claim was allowed without the delivery of vacant possession of the related property to the purchasers.”[11] (underline mine)
However, with all due respect, Her Ladyship’s reliance on Balbeer Singh and Tai Kim Yew is questionable as the statutory contracts of sale in Balbeer Singh were executed in 1996[12] and those in Tai Kim Yew were executed in 1995-1997[13] and did not contain clauses which were similar or in pari materia to Clause 22(3) and Clause 25(3).
The legal question of whether Clause 22(3) of Schedule G and/or Clause 25(3) of Schedule H to the HDR 1989 prevents a purchaser from bringing an action for liquidated damages prior to the delivery of vacant possession remains an issue which has not been judicially determined by the Malaysian appellate courts.
Controller’s modification
In the past, Regulation 11(3) of the HDR 1989 allowed the Controller of Housing to issue a certificate in writing to waive or modify provisions of the contract of sale where “owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary.”
However, the Federal Court in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 MLJ 281 held that Regulation 11(3) of the HDR 1989 is ultra vires the HDA 1966.[14]
As such, the Controller’s modification of Clause 22(3) of Schedule G and/or Clause 26(3) of Schedule H to the HDR 1989 is no longer a viable option.
Even if Regulation 11(3) of the HDR 1989 were still applicable, it is unclear whether the Controller of Housing would find that the undesirable scenario above amounts to “special circumstances or hardship or necessity” especially since it would undermine the Minister’s act of introducing the clauses.
[1] See Clause 23(3) of Schedule G and Clause 26(3) of the Housing Developers (Control and Licensing) (Amendment) Regulations 2002 [PU(A) 473/2002] (https://www.hba.org.my/laws/housing_reg/2002/PU(A)473-2002.htm)
[2] See Section 6(1) of the Limitation Act 1953
[3] See Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 MLJ 281, at Held (1), (4), and paragraph 40; see also PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and other appeals [2021] 2 MLJ 60, at paragraphs 27 and 31
[4] Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 6 MLJ 15, at paragraph 47; see also CIMB Bank Bhd v Anthony Lawrence Bourke & Anor [2019] 2 MLJ 1, at paragraph 27
[5] SEA Housing Corporation Sdn Bhd v Lee Poh Choo [1982] 2 MLJ 31, at p. 34: “It would appear that only “contracting out” in favour of the weaker party — i.e. the purchaser — might be countenanced by the courts.”
[6] Insun Development Sdn Bhd v Azali bin Bakar [1996] 2 MLJ 188, at p. 191
[7] Insun Development Sdn Bhd v Azali bin Bakar [1996] 2 MLJ 188, at p. 196
[8] The Pacific Bank Bhd (sued as guarantor) v Kerajaan Negeri Sarawak [2014] 6 MLJ 153, at paragraph 109
[9] E.g. see CIMB Bank Bhd v Anthony Lawrence Bourke & Anor [2019] 2 MLJ 1, at paragraph 65
[10] Ganda Selat Sdn Bhd v Mohammadi bin Mt Abu @ Ramli & Ors [2019] MLJU 1651, at paragraph 18
[11] Ganda Selat Sdn Bhd v Mohammadi bin Mt Abu @ Ramli & Ors [2019] MLJU 1651, at paragraph 19
[12] Balbeer Singh a/l Karam Singh & Ors v Sentul Raya Sdn Bhd [2014] 5 MLJ 491, at paragraph 4(a)
[13] Tai Kim Yew & Ors v Sentul Raya Sdn Bhd [2004] 4 MLJ 227, at paragraph 4
[14] Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 MLJ 281, at paragraph 60
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