Arbitrating for balance in property market disputes

IN November 2019, the Federal Court held that the power of the Controller of Housing (Controller) under Regulation 11(3) of the Housing Development Regulations 1989 (HDR), was beyond the powers of the Housing Development Act 1966 (HDA).

The decision was made in the Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals case (AML).

Overnight, housing developers were potentially liable for monumental liquidated ascertained damages (LAD) claims.

Subsequently, in UE E&C Sanjia (M) Sdn Bhd v Lee Jeng Yuh & Anor and another appeal, the Court of Appeal expounded on the principles of AML.

The developer attempted to distinguish AML on the fact that the extension of time to deliver vacant possession was obtained before the sale and purchase agreements (SPA) were executed. But the Court of Appeal dismissed the developer’s argument, holding that the Controller has no power to waive and modify the terms of the SPA in the first place.

The SPA was thus void, and parties were entitled to be restored to the position as if the SPAs were not entered into.

The decision was affirmed in the Federal Court after the application for leave to appeal was dismissed.

Are housing developers now left with no alternative but to bite the bullet? That might not be the case, as recent Court of Appeal cases appear to provide some leeway.

In BluDream City Development Sdn Bhd v Kong Thye & 184 Ors and five other appeals (Bludream), the purchasers relied on AML to file a judicial review against the decision of the Minister in granting an extension of time.

The purchasers’ judicial review was allowed in the High Court, and the developer appealed.

The Court of Appeal distinguished the case of AML and held that the Federal Court’s decision dealt with the Controller’s power under Regulation 11(3) of the HDR and not the Minister’s power under Section 24 of the HDA to regulate and prohibit the conditions and terms of the SPA.

The Minister thus retains the power to grant an extension of time for the developer to complete the units.

AML was once again used in Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd and another appeal (Obata).

In Obata, the purchaser relied on AML and sought for LAD, but the Court of Appeal dismissed the claim on the basis that it was time-barred.

A legal action to enforce one’s rights must be commenced within a certain period, known as limitation period. In Malaysia, the limitation period to commence an action for breach of an agreement is six years.

In this case, the SPA was executed in 2012, and vacant possession was delivered in 2017.

However, the purchaser’s action was only commenced in 2020.

These two cases are currently pending appeal at the Federal Court.

Nevertheless, they may provide some leeway for developers to distinguish AML currently.

Crucially, Bludream may allow developers to apply for an extension of time as long as it is approved and signed by the Minister instead of the Controller.

Ultimately, a balance must be sought between protecting the rights of purchasers as intended by AML, and the rights of developers, especially where there are cogent reasons for an extension of time.

LEONARD YEOH and CALEB SIO

Tay & Partners

Kuala Lumpur