Ruling on housing tribunal’s scope raises more questions


Vasantha Ganesan, TheEdge Markets
March 4, 2021

Hakem Arabi & Associates
Ranjan: The tribunal may now be rendered as constrained in its scope and jurisdiction and encourages more aggrieved purchasers to head directly to commence action in court

THE next time you take vacant possession (VP) of your new home, you may want to thoroughly check that the property is indeed what you paid for. And if it is not exactly what was specified in the sale and purchase agreement (SPA), it would be best not to commence any work on it, especially if you plan to turn to the Tribunal for Homebuyer Claims for recourse.

On Feb 10, the Federal Court made a landmark ruling on the scope of and powers of this tribunal, stating that it can only decide on claims against what was expressly stipulated in the SPA, and not based on the purchaser’s expectations or what was displayed in the developer’s showroom.

The apex court also decided that if the purchaser has taken possession of the property, inspected it and went on to renovate the unit, he is estopped in law to maintain a claim that he had been handed the wrong unit by the developer (in that it was not the specific unit he had paid for).

This decision raises numerous questions. What are the alternative avenues for recourse? Can these avenues be as easy, quick and cheap as the tribunal? Should the purchaser reject the property, hold on to the unit and live in it, or rent it out even as he continues to service his loan?

The landmark decision was made by a three-member bench comprising judges Puan Sri Zaleha Yusof, Datuk Zabariah Mohd Yusof and Datuk Rhodzariah Bujang. As at Feb 18, the written judgment had not been released.

Here are the facts of a case. On Aug 23, 2013, one Ho Chee Kian — a Singaporean — signed an SPA with developer Country Garden Danga Bay Sdn Bhd (CGDB) to purchase a RM1.6 million condominium unit. After VP was delivered in 2017, he lodged a complaint with CGDB in a letter dated Dec 4, 2017, saying that the balcony at the unit should have been a covered one.

Ho then filed a RM50,000 claim with the Tribunal for Homebuyer Claims as compensation for delivery of the wrong unit. On June 7, 2018, the tribunal awarded him compensation of RM50,000.

In July, CGDB challenged the decision of the tribunal by way of a judicial review application in the High Court, naming Ho and the tribunal as defendants. On Dec 27, 2018, the High Court dismissed the judicial review application. The property developer then turned to the Court of Appeal, but its appeal was dismissed.

In July 2020, CGDB managed to obtain leave to appeal to the Federal Court, asking it to determine four legal questions, including whether Ho’s claim that he had been allotted the wrong unit by the developer is maintainable after he had inspected the property, taken possession of it and renovated it, or whether he is precluded from maintaining such a claim by law of estoppel and acquiescence.

When The Edge reached out to several lawyers for comment, they declined to be quoted pending the written judgment. But they posed these questions: Must the buyer make these claims before he takes VP of the property? What is the buyer’s remedy if he has already taken VP and then realises the wrong specifications? Can the tribunal only consider issues arising from the SPA and not an essential element of contract such as the invitation to treat (like a brochure or showroom unit) that leads to an offer to purchase being made?

“While appreciating that the grounds of judgment of the Federal Court is not out as yet, it can be assumed that the clear message of the court is that the housing tribunal cannot willy-nilly award compensation/damages to purchasers outside its scope and jurisdiction, which will be limited to what the developer and purchaser have agreed to in the SPA and no other supplementary documents as proof. To sum up, the claim in the tribunal will be confined to a contractual claim,” Lawyer Ranjan N Chandran, a commercial and construction partner at Hakem Arabi & Associates, tells The Edge.

He points out that the decision of the Federal Court was on a complaint of the purchaser to the housing tribunal, but that “it is yet to be seen and tested if this decision to prevent purchasers from making claims against the developer if they have taken vacant possession and renovated their homes will be applicable across the board to civil actions commenced in court”.

Ranjan opines that an action commenced by the purchaser in the civil courts is quite different since the purchaser will have a much wider latitude of claim, not only in the law of contract but the law of tort for misrepresentations based on what was represented, promised or assured to the purchasers by advertisement, circulars, promotional marketing launch events or even model showhouses.

The Tribunal for Homebuyer Claims was established under the Housing Development (Control & Licensing) Act 1996 (HDA) in December 2002. Purchasers of HDA properties have the platform to bring their cases to the National Housing Tribunal/Strata Management Tribunal. This has to be contrasted with normal commercial projects where the only avenue is the civil courts based on the freedom to contract and terms agreed to by the parties. The maximum jurisdiction award of the tribunal in a particular claim is RM50,000.

“The tribunal may now be rendered as constrained in its scope and jurisdiction and encourages more aggrieved purchasers to head directly to commence action in court,” says Ranjan.

He explains that the common ground that must be appreciated — be it an action commenced with the tribunal or the civil courts — is a trite principle of law, which states that generally the purpose of damages for breach of contract is meant to place the claimant in the same position as if the contract had been performed. “Damages or compensation is not meant to bring about unjust enrichment,” he highlights.

Thus, Ranjan’s advice to purchasers is to be cautious in what they intend to do and not “blow hot and cold”. If the purchaser decides to complain to the Tribunal for Homebuyer Claims about unresolved defects or non-adherence to specifications by the developer, then the status quo of the parcel upon receiving VP should be maintained. “Embarking on renovations that will substantially alter that status quo may jeopardise their compensation claims,” he points out.

A lawyer who declines to be named observes that since the HDA is supposed to be a social legislation, “then the tribunal’s role may have been adversely impacted by this decision”. Social legislations seek to protect the interests of home purchasers, who are in a more vulnerable position due to the inequality in bargaining power, against the property developers.