1. Overview This case involved an appeal by 46 house buyers (Appellants) against a High Court decision that dismissed their claim to enforce a statutory guarantee and indemnity against the directors (Respondents) of a developer company, Yusen Jaya Sdn Bhd. The Appellants sought to recover a judgment sum of RM4,593,372.67 previously awarded against the developer for structural defects and late delivery.
2. Background Facts The Respondents, as directors, had provided a Letter of Guarantee to the Controller of Housing (COH) as a condition for obtaining a developer’s license. When the developer failed to pay the judgment sum from a prior suit (Suit K-79), the COH executed a Deed of Assignment (DOA 2015), transferring all rights under the Guarantee to the Appellants.
3. Validity of the Deed of Assignment (DOA 2015) The Respondents argued that the COH could not assign statutory duties to private individuals. The Court of Appeal rejected this, affirming that the DOA 2015 was a valid absolute legal assignment under section 4(3) of the Civil Law Act 1956. The court noted:
“The COH in his capacity as a regulator under the 1978 Enactment has the necessary residual power to pursue the chose in action to recover losses and damages suffered by the plaintiffs even though the COH had suffered no loss or damage”.
By acquiring these rights, the court held that “the plaintiffs can step into the shoes of the COH” and independently bring action against the guarantors.
4. Purposive Interpretation of “Social Legislation” A central issue was whether the Guarantee covered structural defects or was limited to project completion. The Court of Appeal held that the High Court erred by not adopting a purposive approach. The court emphasized:
“The 1978 Enactment… is a social legislation. All requirements under the law should be interpreted in line with the purpose or the intention of the legislator who passed the law… It provides a measure of protectionto house buyers against unscrupulous developers“.
The court further noted that such legislation is intended “to tip the scales of justice in favour of the home buyers” due to the disparity in bargaining power.
5. Scope of the Respondents’ Liability The Court ruled that the Guarantee and Indemnity clauses must be read conjunctively. Under this interpretation, the Respondents were found to have agreed to:
“indemnify the plaintiffs against all loss or damage caused to them or any of them arising or resulting from any breach of obligations by Yusen Jaya, or failure to complete the said housing development”.
This broad scope successfully encompassed the structural defects for which the developer was liable.
6. Statutory Limitation The Respondents contended the claim was time-barred as the project was completed in 2005. The Court disagreed, ruling that for the Appellants, “time started to run… from the date of the DOA 2015” because that was the date they legally acquired the right to enforce the claim from the COH.
7. Final Decision The Court of Appeal unanimously allowed the appeal, setting aside the High Court judgment. The Respondents were held jointly and severally liable to pay the balance of the judgment sum, amounting to RM3,253,644.67, plus 5% interest and costs.
Disclaimer: This post is for informational purposes only and does not constitute legal advice. Please consult a qualified Advocate & Solicitor for your specific legal needs.
