S.E.A. HOUSING CORP. SDN. BHD. V. LEE
FEDERAL COURT, KUALA LUMPUR
SUFFIAN LP, SYED OTHMAN FJ, ABDUL HAMID OMAR FJ
[CIVIL APPEAL NO. 67 OF 1981]
19 MARCH 1982
Appeal dismissed; Cross-appeal dismissed.
The plaintiff (respondent before us) wanted to buy a shophouse on lot
25602 1,680 sq. ft. in area in phase 5 in SEA Park, Petaling Jaya, from the
defendant who is a licensed developer (appellant
It is common ground that the transaction between the two is governed by
the Housing Developers (Control) and Licensing) Act 1966 ("the Act") and the
Housing Developers (Control and Licensing) Rules 1970("the rules") published
as P.U.(A) 268/70.
On 2 January 1974 by a written agreement (ABI) the plaintiff agreed to
buy from the defendant the shophouse at the price of RM175,000. Under the
agreement the defendant was to complete the said building within 18 months
from the date of the agreement, i.e. on or before 1 July 1975. The plaintiff
paid a deposit and paid the rest of the purchase price progresively. In fact
the building was not completed until 16 June 1977. It is a term of the said
agreement that the defendant should pay liquidated damages at the rate of 8%
per annum on the purchase price for any delay in the completion of the said
building up to the date of actual completion and delivery of possession.
The following events then happened. By a letter dated 16 June 1977 (AB23)
the defendant wrote to the plaintiff notifying her that the building had
been completed and the Certificate of Fitness was ready for collection. The
defendant asked the plaintiff to pay $17,907.20 made up as follows: RM17,500
being the final instalment of the purchase price and $407.20 being quit rent
for a period of 4 years.
Upon receipt of the abovementioned letter, the plaintiff replied as in
AB26, pointing out to the defendant that under Clause 17 of the agreement
the building was to be completed within 18 months, but the said building was
completed 23 months and 15 days late. Further, the plaintiff asked whether
the defendant had obtained any extension of time from the Controller of
Housing and claimed that if no extension had been given by the Controller
she was entitled to liquidated damages at 8% per annum on the purchase price
which according to her calculation amounted to RM27,826.66, i.e. from 2 July
1975 to 1 June 1977.
The plaintiff further stated in that letter that the balance of
517,907.20 which was payable by her was far less than the amount to which
she was entitled under the agreement a liquidated damages. Therefore she
suggested that the defendant should hand over the keys and pay her
RM9,919.46, the difference between the two amounts.
The defendant replied on 15 August 1977 (Exh. AB28) asking the plaintiff
to call at its office to discuss the matter.
In the meantime, on 13 August 1977 the plaintiffs solicitors had written
to the defendant AB27, claiming that their client was entitled to set off
against the balance of the purchase price the liquidated damages due to the
plaintiff under the agreement and asking the defendant to hand over the key
and pay the plaintiff RM9,919.46.
Subsequently, the defendant instructed its solicitors who by a letter
dated 23 September 1977 (AB34) stated inter aliaas follows: -
2. Our client instructs us that the payment of the balance of the
purchase price to our client and the delivery of the keys and premises by
our client, and your client's claim for damages for alleged delay are two
entirely separate issues. We are instructed to give you notice, which we
hereby do, that if your client wishes to obtain delivery of the keys to
the promises, she must immediately pay all outstanding sums to our client.
If she does not do so, she will be held fully responsible for any delay in
the delivery of the keys to her.
3. With respect to the entirely separate issue of your clients's claim
for damages for alleged delay in the completion of the three-storey
shophouse, our instructions are as follows.
4. Our client instructs us that it denies any liability to pay any
damages for the delay in completion alleged by your client. We are
instructed to draw your clients attention to the provisions in the Sale
and Purchase Agreement including Clause 32. Our client instructs us that
the alleged delay in the delivery of vacant possesion, if any (which is
hereby denied), was caused by circumstances beyond the control of our
client. Apart from the acute shortage of contractors, subcontractors,
skilled and semiskilled labour and construction workers during part of the
relevant stage of the construction, there was also at the relevant time a
general shortage of building materials particularly cement. We are
instructed that the acute shortage of contractors etc. referred to above
was the result of unforeseen simultaneous commencement and development of
several large housing estates in the neighbourhood of our client's
development. This large-scale development in the neighbourhood increased
the mobility of contractors etc. under the pressure of supply and demand
and also created a shortage in absolute terms. With regard to the shortage
of building materials, we are instructed that our client was compelled to
import cement from overseas sources with the approval of the relevant
5. Our client instructs us that the schedule in Clause 3 of the
Agreement was adopted from the schedule given under the Developers Rules,
which was ascertained subsequently to be generally applicable to the sale
of link or terrace houses and strictly speaking was not intended for the
sale of three-storey of their structure should reflect the difference
stages of the construction of a three-storey shophouse. Despite the
adoption of a schedule payment disadvantageous to our client could have
although our client could have applied to the Controller of Housing for a
new schedule at the time of the drafting of the Sale Agreement, our client
adhered to the original schedule.
6. In view of what is stated above our client instructs us that your
client has no valid grounds to claim for damages for the alleged delay and
our client denies any liability there of.
On 30 September 1977, the plaintiffs solicitors replied (AB36) as
The issues are not separate. By reason of the delay in completion, our
client is entitled to damages and what our client is saying is that she sets
off the damages for delay against the sum due to your client and demand the
payment of the balance of the damages. Both arise out of, the same matter.
The reasons you have advanced cannot be a ground to deny our client's
claim for damage for delay.
Our client quite justifiably, has instructed us not to waste time with
you and your client on this by further correspondence. Accordingly our
client will issue a writ of Summons against your clients. Do you have
instructions to accept service.
On 10 October 1977, the plaintiff issued a writ against the defendant. In
her statement of claim she said that the agreement is subject to the Housing
Development (Control and Licensing) Rules 1970. This is admitted by the
defendant in para. 3 of the defence which further avers that the common law
and other statute law also apply. The defendant also admits that under the
agreement it was required to complete the said building within a period of
18 months from the date of the agreement, that the plaintiff has paid 90% of
the purchase price and that the defendant should pay the plaintiff
liquidated damages at 8% per annum on the purchase price for any delay in
completion of the said building. However, the defendant claims that it is
protected by Clause 32 of the agreement which exempted the defendant from
liability for non-fulfilment of any terms and conditions of the agreement if
such non-fulfilment was caused by circumstances beyond the defendant's
The plaintiff claimed
(a) the sum of RM9,919.46;
(b) loss of rent at RM2,400 per month from 16 June 1977 when the
shophouse should have been completed until delivery of possession;
(c) delivery of possession of the shophouse and its keys;
(d) delivery of the issue document of title and various other reliefs.
In the event the learned Judicial Commissioner dismissed claim (b) but
allowed all other claims.
The developer appealed from that part of the
judgment allowing claims under heads (a), (c) and (d), while the plaintiff
cross-appealed against that part dismissing her claim under head (b).
Three issues arise before us in the appeal:
(1) Is Clause 32 of the agreement valid?
(2) If so, was the learned Judicial Commissioner right in holding that
the acute shortage of cement, etc. did not come within Clause 32 such that
the defendant is not liable for the delay? and
(3) Did the plaintiff in withholding payment of the last instalment
due, commit breach of the Agreement?
As to the rules which govern the transaction between the parties, r. 12is
relevant. That rule provides that every contract of sale - such as the one
here - shall be in writing and shall contain within its terms and conditions
provisions to the effect set out in the various paragraphs of that rule.
Para. (o) is relevant; that says that the agreement must specify:
the date of delivery of the vacant possession of the housing
accommodation to the purchaser which date shall not be later than 18 months
after the signing of the contract of sale.
That, as we have seen, was done. Then there is para. (r) which provides
that the agreement must contain:
provisions binding on the 'licensed housing
developer that he shall indemnify the purchaser for any delay in the
delivery of the vacant possession of the housing accommodation. The amount
of indemnity shall he calculated from day to day at the rate of not less
than eight per cent per annum of the purchase price commencing immediately
after the date of delivery of vacant possession as specified in the contract
That too was done, as we have seen.
But then the developer says, as we have seen,
that it is excused from liability by Clause 32 of the agreement which reads:
The vendor shall not be liable to purchaser for any failure to fulfil
any terms of this Agreement if such fulfilment is delayed, hindered or
prevented by force majeureincluding but not limited to acts of God
strikes lockouts riots civil commotion acts of war or the disability of
contractors and subcontractors employed by the vendor either commencing,
carrying on or completing their work or failure to obtain any necessary
sanction or approval of any local authority or any other circumstances of
whatsoever nature beyond the control of the vendor.
It is said here that owing to the then building boom and resultant
shortage of building materials and labour which was beyond the control of
the developer it is not liable because of this
With great respect to Mr. Chelliah for the developer
we do not agree that it is open to the developer
to escape liability by inserting Clause 32 in the agreement. It is common
knowledge that in recent years, especially when government started giving
housing loans making it possible for public servants to borrow money at 4%
interest per annum to buy homes, there was an upsurge in demand for housing,
and that to protect home buyers, most of whom are people of modest means,
from rich and powerful developers, Parliament found it necessary to regulate
the sale of houses and protect buyers by enacting the Act. That was why rule
12was enacted and in particular paras. (o) and (r) thereof. With respect we
do not agree with Mr. Chelliah that it was open to a
developer' to get round these paragraphs by the inclusion of such a
clause as Clause 32 in this agreement.
In Daiman Development Sdn. Bhd. v. Mathew Lui Chin Teck & Anor.
2 MLJ 239 we said at p. 243 that developers are bound by the rules and if an
agreement of sale is subject to contract, only details may be inserted into
the further agreement.
Mr. Chelliah argued that Clause 32 is such a detail. With respect we do
not agree. In our judgment such details as are inserted into a written
agreement must be details consistent, not inconsistent with the Act and
rules. Clause 32 is inconsistent with para. (r) of rule 12(1).
When Daimanwent to the Privy Council(`) their Lordships observed
at page 60, second column:
... it seems to their Lordships that upon the proper construction of
the proforma [used in that case] the solicitors [for the
developer there] would not be able to include
in the contract of sale any term or condition which was not appropriate to
effectuate the sale which had been made, including that purpose, of
course, provisions to comply with the requirements of the rules."
Thus it is clear that only terms and conditions designed to comply with
the requirements of the rules that may be inserted in a contract of saleof
land that is governed by the Act and rules, and that on the contrary terms
and conditions which purport to get round the Act and rules so as to remove
the protection of home buyers may not be so inserted.
With respect, the provisions in question here are similar to those in a
House of Lords decision, Johnson & Anor. v. Mareton 3 All ER 37
where at page 49 Lord Hailsham said:
The policy of the law has been repeatedly used to protect the weaker of
two parties who do not contract from bargaining positions of equal
strength. (line a).
The truth is that it can no longer be treated as axiomatic that, in the
absence of explicit language, the courts will permit contracting out of the
provisions of an Act of Parliament - as was attempted here - where that Act,
though silent as to the possibility of contracting out, nevertheless is
manifestly passed for the protection of a class of perons who do not
negotiate from a position of equal strength, but in whose well-being there
is a public as well as a private interest." (line donwards).
It would appear that only "contracting out" in favour of the weaker party
- i.e. the purchaser might be countenanced by the Courts.
The construction we place on the rules is not as harsh as it seems to a
developer - for he has a safeguard in subrule
(2) of rule 12 which provides:
Notwithstanding the provisions of para. (1) of this Rule, where the
Controller [of Housing] is satisfied that owing to special circumstances
the compliance with any provisions ofthis Rule is impracticable or
unnecessary he may by a certificate in writing waive or modify such
provisions in respect of any contract of sale.
Thus in the circumstances of this case it would have been open to the
developer to try and persuade the
Controller to modify the rigours of paras. (o) and (r) of rule 12(1).If it
had succeeded it would have escaped liability. But it made no attempt to do
But Mr. Chelliah says that under the terms of rule 12(2)the
developer could have done so only before a
contract of sale had been finalized and not after. With respect we do not
agree; in our judgment it is open to a developer
to take advantage of this provision after as well as before such a contract
has been finalized.
For the reasons given above, we are of the opinion that Clause 32, being
inconsistent with rule 12and not designed to comply with the requirements of
the rules and in the absence of waiver or modification by the Controller of
Housing under rule 12(2), is void, and that therefore the
developer is liable in damages for the delay in
In view of our conclusion on the first issue, there is no need for us to
consider the second issue.
As regards the third issue we are of the opinion that the plaintiff did
not breach the agreement when she withheld payment of the money demanded by
As was stated by Lord Denning M.R. at pp. 337 & 3388 in Federal
Commerce Ltd. v. Molena Alpha Inc. 3 WLR 309:
It is often necessary to distinguish between a set off or defence
properly so called; and a counterclaim or cross-action ...
... take the, case where a contract gives a creditor a right to take
the law into his own hands - to take a particular course of action if a
sum is not paid - such as forfeit a lease for non-payment of rent, or to
withdraw a vessel for nonpayment of hire. There the distinction between
set-off and cross-claim is crucial. When the debtor has a true set off it
goes in reduction of the sums owing to the creditor. If the creditor does
not allow it to be deducted, he is in peril. He will be liable in damages
if he exercises his contractual right of withdrawal wrongly. But when the
debtor has no set off or defence property so called, but only a
counterclaim or cross-action, then the creditor need not allow any
deduction to be made. He can exercise his contractual right without fear;
and leave the debtor to bring an action for damages on his counterclaim.
... But one thing is quite clear; it is not every cross-claim which can
be deducted. It is only cross-claims that arise out of the same transaction
or are closely connected with it. And it is only cross-claims which go
directly to challenge the plaintiff's demands, that is, so closely connected
with his demands that it would be manifestly unjust to allow him to enforce
payment without taking into account the cross-claim.
The plaintiff's cross-claim and the defendant's claim arise out of the
same transaction and are closely connected with each other. The plaintiffs
cross-claim is so closely connected with the defendant's demand that it
would be manifestly unjust to allow the defendant to enforce payment without
taking into account the plaintiff's cross-claim.
The decision of the House of Lords in Modern Engineering (Bristol)
Ltd. v. Gilbert Ash(Northern)Ltd.  AC 689 substantiates the
position taken by the plaintiff in this matter, and the House in that case
disapproved Dawnays Ltd. v. F.G. Minter Ltd. 2 All E.R. 1389;
in any event Dawnayswas decided on the basis that it was not
permissible to deduct claims which were unliquidated and still in dispute,
which is not the case here. The damages claimed by the plaintiff for the
delay were capable of quantification under the terms of the agreement in
accordance with the provisions of r. 12(1)(r) of the Rulesand cannot be in
dispute if Clause 32 of the agreement is of no effect.
For the above reasons we would dismiss the defendant's appeal.
As regards the plaintiff's cross-appeal, from the decision of the learned
Judicial Commissioners dismissing her claim under head (b) ie. her claim for
loss of rent which she would have received for the shophouse had it been
completed within the time stipulated in the agreement, in our judgment the
learned Commissioner was right, and we would accordingly dismiss the
cross-appeal. We agree with him that there was insufficient evidence to
justify the plaintiff's claim.
Before us, Mr. Sethu argued that there was no need at the stage of the
trial for him to bring sufficient evidence, as he had asked during the
course of his submission in the High Court that if there was a basis for his
claim the matter of damages be referred to the Registrar for evidence and
determination. We do not think it necessary to consider this argument,
because in our judgment para. (r) of r. 12(1)covers this head of claim. The
paragraph specifically deals with the indemnity to be paid to the purchaser
"for any delay in the delivery of the vacant possession of the
housing accommodation ... the amount of indemnity ... to be calculated from
day to day at the rate of not less than eight per cent per annum of the
purchase price commencing immediately after the date of delivery of vacant
possession as specified in the contract of sale." In our judgement, this is
intended to be comprehensive - and precludes the purchaser from recovering
under any other head damages in the event of delay in delivery as happened
To sum up - we dismiss the defendant's appeal with costs.
We also dismiss the plaintiff's cross-appeal with costs.