This landmark Federal Court decision settled several critical disputes regarding housing law in Malaysia, primarily focusing on the calculation of damages for late delivery of properties and the protection of home-buyers under “social legislation”.
1. Case Information
- Court: Federal Court, Putrajaya.
- Coram: Tengku Maimun Tuan Mat CJ, Nallini Pathmanathan, Abdul Rahman Sebli, Zabariah Mohd Yusof, Mary Lim Thiam Suan FCJJ.
- Date of Judgment: 19 January 2021.
- Parties: The case involved seven appeals from three sets of cases: PJD Regency, GJH Avenue, and Sri Damansara.
2. Facts of the Case
The appeals involved purchasers who claimed Liquidated Agreed Damages (LAD) from developers for the late delivery of vacant possession and common facilities. The central dispute was whether the time for delivery (and thus the calculation of LAD) should be counted from the date the booking fee was paid or the date the Sale and Purchase Agreement (SPA) was signed. In some appeals, developers also argued that LAD should be calculated based on a rebated price rather than the price stated in the SPA to avoid “unjust enrichment”.
3. Legal Issues
- Does the calculation for LAD begin from the date of the booking fee/deposit or from the date of the SPA?
- Are the Housing Development (Control and Licensing) Act 1966 (HDA) and its Regulations (HDR) considered “social legislation”?
- What is the legal effect of developers collecting booking fees, which is prohibited under Regulation 11(2) of the HDR 1989?
- Should LAD for common facilities be calculated from the Certificate of Completion and Compliance (CCC) or the Certificate of Practical Completion (CPC)?
- Does calculating LAD on the full SPA price (despite a rebate) constitute unjust enrichment?
4. The Decision (Ratio Decidendi)
The Federal Court dismissed the developers’ appeals and allowed the purchasers’ appeals, establishing the following principles:
- LAD Calculation Date: The calculation of LAD for late delivery begins from the date of payment of the booking fee/deposit, and not the date the SPA was formally signed.
- Social Legislation: The HDA and HDR are social legislation designed to protect home-buyers who have less bargaining power than developers. Consequently, courts must use a purposive interpretation to ensure maximum protection for the purchasers.
- Illegality of Booking Fees: The collection of booking fees is absolutely prohibited by law. Developers cannot benefit from their own illegal act by using the SPA date (which they control) to reduce their liability for late delivery.
- Completion of Facilities: The certification of completion for common facilities must be in the form of a CCC, as it is a legal requirement ensuring the building is safe and fit for occupation, unlike a CPC which is a matter between a developer and a contractor.
- No Unjust Enrichment: Purchasers are not “unjustly enriched” when LAD is calculated on the full SPA price because the rebate is essentially a post-facto discount, and LAD is a statutory remedy that cannot be offset by the developer.
5. Relevant Excerpts from the Court
On the purpose of Social Legislation: “The phrase ‘social legislation’… is not merely a fanciful label. In disputes between home buyers and housing developers, its significance lies in the approach taken by the courts to tip the scales of justice in favour of the home buyers given the disparity in bargaining power…”.
On the commencement date of LAD: “…where a developer fails to deliver vacant possession according to the time stipulated in the statutory sale and purchase agreement, the calculation of the LAD begins from the date of payment of the booking fee and not from the date of that statutory agreement”.
On the prohibition of booking fees: “Regulation 11(2)… very clearly stipulates and expressly provides for an absolute prohibition against the collection of booking fees howsoever they are called or described… To give effect to this legislative intent… the date of the contract cannot be taken to mean the date printed in the Scheduled Contracts”.
On Unjust Enrichment and Rebates: “The LAD prescribed by law is a statutory remedy afforded to the purchasers. There can therefore be no question of unjust enrichment upon an innocent party’s right to enforce his statutory remedy against the party in breach”.
6. Significance
This case reinforced the supremacy of statutory protection over the literal words of a contract in housing law. It effectively stopped the “ingenious schemes” used by developers to bypass their obligations, such as taking deposits months before signing the formal SPA to delay the delivery deadline.
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified lawyer for your specific legal needs.
