Malaysia: Vacant Possession: A Developer's Horror Story?

Based on a true story, Witter Yee recounts the tale of two conflicting Court of Appeal decisions.

Housing developers in Malaysia thought they had found some relief when the Court of Appeal decided that the date of delivery of vacant possession should be calculated from the date of the sale and purchase agreement. Alas, their relief was short-lived when two days later, a different panel of the Court of Appeal decided that it should be calculated from the date when the booking fee was paid.

This is the tale of the Court of Appeal's decisions on 20 August 2019 in the case of GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah, Kementerian Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Ors [2019] 6 AMR 112 ("GJH Avenue") and on 22 August 2019 in the case of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor (Civil Appeal No: W-01(A)-174-03/2018) ("PJD Regency").

GJH AVENUE

Brief Facts

The 2nd and 3rd respondents purchased a bungalow unit from the appellant for the purchase price of RM402,600.00. A booking fee of RM5,000.00 was paid for the said unit on 24 October 2011. Thereafter, the Sale and Purchase Agreement was signed between the parties on 13 February 2012 ("GJH-SPA"). Notice of delivery of vacant possession for the said unit was issued by the appellant on 14 February 2014. Clause 22 of the GJH-SPA requires vacant possession to be delivered within 24 months from the date of the GJH-SPA. As the GJH-SPA was signed on 13 February 2012, and the notice of vacant possession was issued on 14 February 2014, the appellant took a stand that they were only two days late in delivering the vacant possession of the said unit.

The 2nd and 3rd respondents subsequently filed their claim at the 1st respondent, the Homebuyer's Tribunal ("Tribunal"), for liquidated ascertained damages against the appellant for a higher sum. The Tribunal decided that the 24 months for delivery of vacant possession commenced from the date on which the booking fee was paid and awarded the sum of RM12,353.76 to the 2nd and 3rd Respondents as liquidated ascertained damages.

Dissatisfied with the award, the appellant sought to quash the award of damages by the Tribunal and to obtain a declaration that the Tribunal has committed a statutory breach of housing development laws. The High Court dismissed the appellant's judicial review application. The appellant appealed to the Court of Appeal.

Decision of the Court of Appeal

The Court of Appeal in allowing the appellant's appeal, set aside the liquidated ascertained damages awarded in favour of the 2nd and 3rd respondents. Zaleha Binti Yusof JCA held, inter alia, that:

1. Clause 22 of the GJH-SPA, the latter of which is a prescribed statutory contract set out in Schedule G of the Housing Development (Control and Licensing) Regulations 1989 ("HDR 1989"), is clear and unambiguous. It specifically provides that vacant possession shall be delivered within 24 calendar months "from the date of this Agreement"; there is no need for the courts to go through the authorities in finding the plain meaning;
2. Regulation 11(2) of HDR 1989 which prohibits the collection of any payment except as prescribed by the SPA clearly indicates that "the date of the Agreement" as provided for in the GJH-SPA is the actual date the GJH-SPA was entered into, i.e. 13 February 2012; the law as prescribed does not allow the parties to a Schedule G agreement to contract out of the scheduled form; and
3. The Tribunal has committed a statutory breach by acting beyond the four corners of the housing development laws that created it and gave it power.

The Court of Appeal affirmed its earlier position in Kompobina Holding Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor [2017] MLJU 2268 that the date of delivery of vacant possession under a Schedule G agreement is 24 months from the date of the sale and purchase agreement.

At first blush, it appears that the decision in GJH Avenue is a clear departure from the Supreme Court's decisions in Faber Union Sdn Bhd v Chew Nyat Shong & Anor [1995] 3 CLJ 797 and Hoo See Sen & Anor v Public Bank Bhd [1988] 1 CLJ (Rep) 125 which held that the date when time starts to run for the delivery of vacant possession is the date when the purchaser paid the booking fee.

However, it is to be noted that Zaleha JCA in this case did consider Faber Union and Hoo See Sen but expressly declined to follow the same as they concerned sale and purchase agreements which were pre-schedule G of the HDR 1989 and Housing Development (Tribunal for Homebuyer Claims) Regulations 2002 and are therefore distinguishable and not to be relied upon.

PJD REGENCY

Brief Facts

The 2nd respondent purchased a condominium unit from the appellant for the purchase price of RM522,800.00. The 2nd respondent paid a booking fee of RM10,000.00 to the appellant on 16 January 2013 before the sale and purchase agreement for the said unit was signed by the parties on 21 March 2013 ("PJD-SPA"). Clauses 25(1) and 27(1) of the PJD-SPA require vacant possession of the property and common property to be delivered within 42 months from the date of the SPA. By letter dated 23 January 2017, the appellant sent a notice of vacant possession to the 2nd respondent.

As a result of the delay, the 2nd respondent lodge a claim with the 1st respondent, the Tribunal, seeking damages for the appellant's delay in delivery of vacant possession of the property and common property. The Tribunal calculated the time for delivery of vacant possession from the date of payment of the booking fee and not the date of the PJD-SPA. The appellant filed an application for judicial review at the High Court. The High Court dismissed the appellant's application and affirmed the decision of the Tribunal. The appellant appealed to the Court of Appeal.

Decision of the Court of Appeal

The Court of Appeal dismissed the appellant's appeal. Yew Jen Kie JCA held, inter alia, that:

1. Based on the Supreme Court decisions in Hoo See Sen and Faber Union, it is settled law that the ascertainment of liquidated ascertained damages for late delivery of vacant possession starts to run from the date of payment of the booking fee or deposit;
2. The decision in Faber Union has been followed by a series of subsequent cases whenever the Courts have been called to determine the date from which liquidated damages for late delivery commences; and
3. The appellant's contention that the booking fee paid was merely to secure the purchase of the property pending procurement of financing and that the date of payment of booking fee should therefore not be used for the purpose of calculating the time of delivery of vacant possession is misconceived. Clause 1 of the PJD-SPA indicates that payment of booking fee, accepted by the appellant constitute offer and acceptance. Accordingly, the appellant must build and deliver vacant possession to the purchaser within the agreed period.

Hence, housing developers who believed that their deliverance was complete were once again haunted by the ghosts of the past in the form of Hoo See Sen and Faber Union.

COMMENTS

In view of these two conflicting decisions of PJD Regency and GJH Avenue, it is now uncertain as to whether the period for delivery of vacant possession starts from the date of payment of the booking fee or the date of the sale and purchase agreement. The appellant in PJD Regency has obtained leave to appeal to the Federal Court. We will have to wait for the Federal Court to resolve this question.

Which will survive and what will be left of them?

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