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Upholding purchaser protection
02/08/2003 NST-PROP  By Salleh Buang

There is a recent case regarding purchaser protection (the primary objective of the Housing Development Act 1966) which merits close study by everybody involved in the local housing industry. Although it is merely a High Court decision (and not one handed down by the highest court in the land), we must not forget that most of our cases on housing law are from the High Court.

The reason is pretty obvious. Not many developers want to spend more money than necessary on the legal fees and court costs to take a case up the judicial hierarchy and appeal a decision, especially since the new judgement could go either way. As any good litigation lawyer will advise, when you go to court, there is no guarantee of a win, even if you think you have a solid case.

The case I want to refer to is that of Hariram a/l Jayaram & 14 Ors v Sentul Raya Bhd [2003] 1 AMR 42, which Justice Abdul Malik Ishak, decided on in Jan 21, 2002, but was only reported in our local law journal a year later.

The facts can be summarised as follows:

The 15 plaintiffs had purchased condominium units from developer Sentul Raya Bhd (the defendant) using standard Sale and Purchase Agreements (SPAs) as stipulated in Schedule H of the Housing Development (Control & Licensing) Regulations 1989.

Under the agreement, the units were to be completed within 36 months, failing which the developer would have to pay liquidated damages. Under Clause 7 of the SPA, time was stated to be of the essence in the contract.

Unfortunately, the defendant failed to deliver vacant possession of the units on the stipulated date. It also failed to complete the common facilities in the project.

As a result, the plaintiffs sued for liquidated damages.

The defendant adopted several strategies to extricate itself out of its predicament. For instance, it argued that the plaintiffs should have first given the company “proper and express notices of termination” as required under sect. 56 of the Contracts Act if they wished to avoid the contract. The company further argued that since the plaintiffs had failed to do so, the defendant was entitled to assume that the plaintiffs had waived their option to avoid the contract, and that since no fresh time for completion had been fixed, time was no longer the essence of the contract.

The defendant also raised sect. 47 of the Contracts Act, which it said allowed the company a leeway to complete the project within a reasonable time. That being so, the defendant contended it was not obliged to pay any liquidated damages to the plaintiffs.

The defendant further maintained that since the plaintiffs had not given any notice of their intention to accept a later performance of the agreement as specified under sect. 56(3) of the Contracts Act, they were not entitled to claim compensation for the delay.

Finally, the defendant said that Schedule H is part and parcel of the 1989 Regulations and that being so, it is merely a piece of subsidiary legislation. As such, it cannot override the general application of the Contracts Act (which is a primary legislation).

Admittedly, it was a clever way of interpreting the law. However, if we are to cherish the stated objective of the Housing Development Act as repeatedly recognised and upheld by our courts, we would probably detect a hollow ring in the defence. I am glad that the learned trial judge saw through it and had no difficulty rejecting it completely.

He began his judgement by making two short sentences. “This was an interesting case. I was told that I am breaking new ground.”

But shortly thereafter, he went straight into the morass of the law, which only seasoned lawyers will comprehend. I will, instead, pick and choose the relevant bits and pieces which can be understood and speedily digest.

The learned judge said (in page 59 of the report) that the 1966 Act is “a specific piece of social legislation to protect house buyers or purchasers from unscrupulous developers”. He cited several established authorities, including my favourite - Tun Suffian’s judgement in SEA Housing Corporation Sdn Bhd v Lee Poh Choo [1982] 2 MLJ 31, which incidentally is also cited in my book Malaysian Law on Housing Developers (Sweet & Maxwell Asia, 2002).

In contrast to that, the learned judge said (in page 61) that the Contracts Act 1950 “is a piece of legislation of a general nature setting out the general law governing contracts between the parties in general”. Reiterating that the 1966 Act “is a specific legislation governing the sale of houses by a licensed developer”, the judge pointed out that the plaintiffs’ claims for liquidated damages in this case “were not based on the general contract but rather on the standard Sale and Purchase Agreements as set out in accordance with Schedule H ….”

Seen in its “correct perspective”, the judge added, the case is “a tussle between the specific law and the general law”. After considering several authorities on the point, the judge summed up (in page 64 of the report) that the 1966 Act “must take precedence” over the Contracts Act 1950 and the SPAs signed by the plaintiffs “must be given effect accordingly”.

Going a bit into the realm of statutory interpretation, the judge explained that “it is axiomatic that in interpreting the specific piece of social legislation at hand, an interpretation must be arrived at so as to advance the object and purpose” of the 1966 Act. Full effect must be accorded to “the avowed social objective” of that Act.

Midway in his judgement for the plaintiffs, the judge said (in page 66) that “it would certainly be erroneous in the extreme to burden the plaintiffs as purchasers with the requirement of sect. 56(3) of the Contracts Act” when the 1966 Act and the 1989 Regulations “do not impose such a burden”. Consequently, the judge ruled that any attempt to impose such a burden “will taint and remove the very protection” which the law provides for purchasers.

If you’re wondering why the defendant in the case did not just pay up (after perhaps offering to pay 60 to 70 per cent of the plaintiffs’ claim), I have to point out that the total penalty for late delivery was a staggering RM1.5 million. It was the usual case of a defendant buying time; having nothing to lose and everything to gain. It was the usual case of wearing out the enemy; of forcing the purchasers to suffer the long wait before their case could finally be heard and disposed of by the local courts.

Yes, it underscored that important objective of the law, as so beautifully put by Tun Suffian more than two decades ago: that the 1966 Act is meant to protect purchasers from unscrupulous developers, to whom purchasers’ rights are sometimes viewed as unnecessary irritants on their way to their bank.


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