The Federal Court on 19 January 2021 held in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah and Ng Chee Kuan and Other Appeals (Federal Court (Appellate Jurisdiction) Case No. 01(f)-29-10/2019(W)) that for the purpose of calculating liquidated agreed damages ('LAD') under a statutory form contract prescribed in the Housing Development (Control and Licensing) Regulations 1989 ('HDR 1989'), the period for delivery of vacant possession commences from the date the purchaser paid the booking fee and not from the date of the sale and purchase agreement.
In arriving at its decision, the Federal Court unanimously affirmed the decisions of the Supreme Court in Hoo See Sen & Anor v Public Bank Berhad  2 MLJ 170 ('Hoo See Sen') and Faber Union Sdn Bhd v Chew Nyat Shong & Anor  2 MLJ 597 ('Faber Union').
At the same time, the Federal Court also made two other significant rulings that are relevant to late delivery claims. First, that under a statutory form contract, the date of completion of common facilities is the date of issuance of the certificate of completion and compliance ('CCC') and not the date of issuance of the certificate of practical completion ('CPC'). Second, that the LAD is to be calculated by reference to purchase price stated in the sale and purchase agreement and any rebate granted by the developer to the purchaser on that amount is to be disregarded.
- The period for delivery of vacant possession commences from the date of payment of the deposit/ booking fee/ initial fee/ expression by the purchaser of his written intention to purchase the property and not from the date of the sale and purchase agreement.
- When interpreting social legislation such as the Housing Development (Control and Licensing) Act 1966 ('HDA 1966') and its subsidiary legislation, the court must give effect to the intention of Parliament and not the parties. Accordingly, the date of the contract cannot be taken to mean the date of the agreement stated in a scheduled contract.
- The HDA 1966 and HDR 1989 expressly provide for an absolute prohibition against the collection of booking fees.
- The date of completion of common facilities under a statutory form contract is the date of issuance of the CCC.
- The LAD is to be calculated by reference to purchase price stated in the sale and purchase agreement and any rebate granted by the developer on that amount is to be disregarded.
The Federal Court heard seven appeals together which arose from three sets of different cases. Two appeals were filed by PJD Regency Sdn Bhd ('PJD Regency'), three by the purchasers against the developer, GJH Avenue Sdn Bhd ('GJH Avenue'), and two by the developer Sri Damansara Sdn Bhd ('Sri Damansara').
Question of Law
The seven appeals essentially raised the same point of law:
"Where there is a delay in the delivery of vacant possession by a developer to the purchaser in respect of Schedule G and/or H type contracts under Regulation 11(1) of HDR 1989 enacted pursuant to Section 24 of the Housing Development (Control and Licensing) Act 1966, whether the date for calculation of liquidated agreed damages ('LAD') begins from:
- the date of payment of deposit/ booking fee/initial fee/expression by purchase (sic) of his written intention to purchase; or
- from the date of the sale and purchase agreement,
having regard to the decisions of the Supreme Court in Ho See Sen & Anor v Public Bank Berhad  2 MLJ 170 and Faber Union Sdn Bhd v Chew Nyat Shong & Anor  2 MLJ 597."
The developers and purchasers adopted different interpretations to the meaning of the words "from the date of this agreement" contained in clause 24(1) of Schedule G of the HDR 1989 and clause 25 of Schedule H of the HDR 1989 ('Scheduled Contract'). The purchasers on one hand, argued that Hoo See Sen and Faber Union both support the proposition that the date of calculation of LAD starts from the date the booking fee is paid. On the other hand, the developers submitted that the Scheduled Contract should be read literally, and the LAD period should commence from the date of the agreement stated in such contract.
Decision of the Federal Court
The Federal Court decided upon a coherent reading of Hoo See Sen and Faber Union that the point of law at issue remains "very much decided". As such, where a developer fails to deliver vacant possession according to the time stipulated in a Scheduled Contract, the calculation of LAD begins from the date of payment of the booking fee and not from the date of the sale and purchase agreement.
The Federal Court also discussed the concept of the HDA 1966 and its subsidiary legislation as "social legislation" as the long title of the HDA 1966 provides in no uncertain terms that the legislation exists for the protection of the interest of purchasers. The Federal Court dismissed the developers' contention that a Scheduled Contract must be "read literally and in accordance with the intention of the parties". Chief Justice Tengku Maimun held as follows at paragraph 33 of the judgment:
"...When it comes to interpreting social legislation, the State having statutorily intervened, the Courts must give effect to the intention of Parliament and not the intention of parties. Otherwise, the attempt by legislature to level the playing field by mitigating the inequality of bargaining power would be rendered nugatory and illusory."
Further, the Federal Court held that the law is crystal clear that developers are prohibited from collecting booking fees pursuant to Regulation 11(2) of the HDR 1989. As such, the collection of booking fees is illegal. However, as the HDR 1989 is a social legislation to protect the interest of purchasers, the existence of a penal provision does not automatically render the contract void pursuant to section 24 of the Contracts Act 1950. The developers being the stronger party in an illegal transaction will have that illegality construed against them and will have to "bear the full extent of the LAD payable by them".
In relation to a leave question that was unique to the two appeals in PJD Regency, the Federal Court held that the architect's certification referred to in clause 27(1) of Schedule H and clause 29(1) of Schedule J is the CCC and not the CPC. The apex court agreed with the Court of Appeal's reasoning that the two documents serve different purposes. The CPC is issued by the developer's architect to the main contractor to confirm that the work undertaken by the latter has been completed to the satisfaction of the developer's architect, whereas the CCC is issued to certify that the property, together with the common facilities, have been constructed and completed in conformity with the approved plans and the relevant laws.
On this basis, the Federal Court held that for the purposes of ascertaining the date of the completion of the common facilities, the relevant date is the date of issuance of the CCC.
The Federal Court was of the view that the Court of Appeal in GJH Avenue was bound to follow the decisions of the Supreme Court in Hoo See Sen and Faber Union based on the doctrine of stare decisis. Accordingly, it set aside the Court of Appeal's decision that the period for delivery of vacant possession commences from the date of the sale and purchase agreement and not the date of payment of the booking fee.
In one of the appeals, the developer posed a leave question as to whether the award of the Housing Tribunal led to the purchasers being unjustly enriched. The developer contended that there was a 10% rebate on the purchase price of the property, and as such the LAD should be calculated based on the rebated purchase price and not the purchase price stated in the sale and purchase agreement.
The Federal Court dismissed the developer's contention as the sale and purchase agreement was derived from a statutory contract and was "not subject to amendment by the parties". Accordingly, the apex court held that the developer was bound by the terms of the statutory contract which states that the LAD is to be calculated based on the purchase price.
This Federal Court decision will be welcomed by purchasers of housing accommodation from housing developers. It is significant in three respects in relation to late delivery claims. First, it lays to rest the conflicting decisions by the Court of Appeal in PJD Regency and GJH Avenue, and makes it clear that the period for delivery of vacant possession commences from the date of payment of the booking fee and not the date of the sale and purchase agreement. While stating that the collection of booking fee is prohibited under the HDA 1966 and HDR 1989, the contravention of this prohibition does not render the contract unenforceable so as to deprive the purchaser of the statutory protection afforded to him by HDA 1966 and HDR 1989.
Second, the decision clarifies that the date when common facilities are deemed to be completed is the date of issuance of the CCC. Third, the Federal Court has also categorically stated that any rebate on the purchase price granted by the developer to the purchaser is to be disregarded from the calculation of the LAD.
Originally published 29 January 2021
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