Introduction

In a recent decision of the High Court in the case of Leong Keng Chiang V Prema Bonanza Sdn Bhd 2021 MLJU 714, the court considered the issue of modifying and varying the completion period of a subject project governed by Schedule H of the Housing Developers Control (Licensing) Act 1966 (‘HDA 1966’). The court further considered the issue of the Settlement Letters signed by the Purchasers in the acceptance of the Liquidated Ascertained Damages (‘LAD’) and whether there is a bar and/or estoppel and/or waiver from claiming further LAD.

Brief Facts:

1. The was a Summary Judgment filed by the Plaintiff/Purchaser as against the Defendant/Developer.
2. There was then a Striking Out Application filed by the Defendant pursuant to Order 18 Rule 19 (1) (b), (c) and (d) Rules of Court 2012.
3. The Court heard both the Summary Judgment and Striking Out applications and decided that the Striking Out be dismissed and the Summary Judgment be allowed.
4. A sale and purchase agreement (SPA) was executed by the Plaintiff with the Defendant for a purchase of a condominium in a project known as Sentral Residences.
5. The SPA was under Schedule H Housing Developers Control & Licensing Act 1966 (‘HDA 1966’) and Housing Development Regulation 1989 (‘HDR 1989’)which stipulates a completion period of 36 months from the date of the SPA.
6. The Developer obtained an extension of the completion period from 36 months to 54 months and which extension was obtained prior to the execution of the SPA.
7. The SPA that was executed reflected the 54 months completion period.
8. The Plaintiffs case was that the amendment of the completion period was void as there was a deviation and contravention of the ‘HDA 1966’ and ‘HDR 1989’.
9. The Plaintiff relied on the Federal Court decision in Ang Ming Lee & Ors V Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor Appeals [2020] 1 CLJ 162.
10. The Plaintiff claimed for LAD in respect of the delay in the completion of both the parcel/unit and the common properties based on the HDA completion period of 36 months.
11. Two Declarationd were sought in the Statement of Claim as follows:-
    1. A Declaration that any extension of time from 36 months to 54 months granted pursuant to Regulation 11(3) HDR 1989 was null and void based on the decision of Ang Ming Lee.
    2. A Declaration that the Developer is bound to comply with Schedule H to deliver vacant possession of the property and the common properties within 36 months from the date of the SPA.

Decision

1. The Court held that that the prescribed Schedule H is regulated by statute ie the ‘HDA 1966’ and ‘HDR 1989’ and cannot be varied.
2. That Schedule H SPA was a Statutory Contract signed by the parties.
3. That parties to a contract in Form H cannot contract out of the ‘HDA 1966’ and ‘HDR 1989’.
4. That parties in a Housing Developers contract do not have the freedom to make provisions between themselves as it is a special contract regulated by statute.
5. A Developer cannot add other clauses in the Agreement executed as set out in the schedule.
6. Court held that any amendments or variations made to the Schedule H SPA is of no legal effect and does not bind the Purchaser(s).
7. The Court disagreed with the Developers contention to distinguish the Ang Ming Lee case that in that case, the extension was obtained subsequent to the execution of the SPA and in this case it was obtained prior to the execution of the SPA and the purchaser had knowledge.
8. The Court held that it does not make a difference whether the extension was obtained prior to the execution or subsequent to the execution of the SPA. The Court held that the outcome remains the same and the Extension of Time (EOT) is unlawful.
9. The Court held that the Federal Court in Ang Ming Lee explained at great lengths that the ‘HDA 1966’ is a social legislation designed to protect house buyers.
10. The court disagreed with the contention of the Developer that there was unjust enrichment.
11. The Court disagreed with the contention of the Developer that the purchaser had waived or was estopped from claiming the full LAD since they had signed the Settlement Letters.
12. The Court held that there can be no estoppel against statutory provision.
13. The Court held that it is truism that there is inequality of bargaining power between Developers and house buyers and that in some cases a Developer might not disclose to a house buyer, the full entitlement to claim LAD under the law.

Conclusion

This Prema Bonanza decision yet again expresses the strong sentiments of our Courts when dealing with a Housing Developers Control and Licensing Act 1966 (‘HDA 1966’) and Housing Development Regulation 1989 (‘HDR 1989’) and that the court shall not condone any attempt by the Developer to contract out of the legislation.

The Courts will mandate strict adherence to the Schedule H template Sale and Purchase Agreement which is not an ornamental agreement but an agreement that prescribes a clear completion of a subject project within the stipulated 36 months.

This decision brings about greater clarity and dispels any misconception that the Ang Ming Lee Federal Court decision shall only apply in instances where the extension for the completion period was obtained subsequent to the execution of the SPA and not prior.

As the Court in the Prema Bonanza case correctly decided, it matters not whether the EOT was prior to execution or subsequent. What is material is that there can be no variation or modifications to the ‘HDA 1966’ and ‘HDR 1989’ agreement since the paramount intent of the Housing Developers Act is for the protection of the purchasers. Any modifications or variations will deprive the entitlement of the purchasers to further Liquidated Ascertained Damages (LAD).

It is interesting to note that the Prema Bonanza case applied the trite principle of law as decided in the locus classicus then Supreme Court case of Hotel Ambassador (M) Sdn Bhd [1991] 1 CLJ 174 at page 179 where the court held that there can be no estoppel as against statutory provisions.

This is indeed relevant to the present case of Prema Bonanza and that of Ang Ming Lee, where it cannot be argued by a Developer that a purchaser is estopped and/or barred from pursuing further LAD claim since a Settlement Agreement had been signed.

The short response to that argument will be that since the Developer itself breached and circumvented the provisions of the legislation, the Developer cannot approbate and reprobate by so contending that the purchaser cannot resile from the settlement agreement. There is no reason why the aggrieved purchasers should be penalized on their rightful entitlement to the further LAD where there is a delay in completion of both their parcel/units and common properties.

The Court of Appeal in a case Loh Tina & Ors V Kemuning Setia Sdn Bhd & Ors and Another Appeal [2020] 7 CLJ 720 summarised the position of the non compliance of the HDA very succiently as follows:-

“This is not a case of the court re-writing the contract of sale for the parties but rather one in which the developer had not followed the statutory form of contract for the SPA…….”

“The developer cannot have the cake and eat it. It cannot openly and blatantly decide not to follow the HDA and the regulations on its understanding that it is exempted from it ……..”.

“To allow that would be to allow the developer here to have the best of both worlds……. It would be a case of “head I win and tail I win also”.