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.
