No excuse not to pay
23/02/2002 Published in NST-PROP A Buyer Watch Article by National House Buyers Association

Is the developer's obligation to pay liquidated ascertained damages mandatory? Yes, says the Housing Buyers Association.

One of the major complaints received by the House Buyers Association (HBA) is the failure or in some cases, blatant refusal of the developers to pay the Liquidated Ascertained Damages (LAD) as provided in Housing Developers Act. The payment of these charges are outlined in Clause 20(2) and Clause 22(2) of Schedule G (Land and Building) and Schedule H (Subdivided Building) respectively. 

Clause 20 (2) of the SPA provides "If the Vendor fails to hand over vacant possession of the said Building to which water and electricity supply are ready for connection to the said Building, in time, the Vendor shall pay immediately to the Purchaser liquidated damages to be calculated from day to day at the rate of ten per centum (10 per cent) per annum of the purchase price ".

The wording in the clause are precise and unambiguous and effect must be given to those words in their natural and ordinary sense, which is that the developer shall pay immediately. The word "shall" places a "mandatory obligation" on the part of the developer to comply, meaning it must pay and pay immediately.

It is our view that the above interpretation was the intention of the legislators and the Ministry of Housing and Local Department when Clause 20 (2) of Schedule G and Clause 22 (2) of Schedule H was drafted.

Tidal CJ in Sussex Peerage Case [1844] 11 CX Fin 85 said ".. the only rule for the construction of Acts of Parliament is, that they should be construed according to the intent of Parliament which passed the Act. If the words of the statute are themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves alone do, in such case, best declare the intention of the law giver"

However, in reality, the house buyers are made to embark on a time consuming legal battle in court with the developers. Many developers appear to ignore the clear wording in Clause 20 (2) of Schedule G (Clause 22 (2) of Schedule H) and challenge house buyers to take legal action against them for the LAD. Encik Zulkefly Abdul Samad, a 46 year old lecturer "the current system of obtaining compensation gave the developers the upper hand"

But why do developers adopt such an arrogant and inequitable attitude? When there is a delay in progress payments, the developers would charge interest under clause 9 of the SPA and do not entertain any form of reasons or explanations from the buyers.However, when it comes to the developers’ liability house buyers' rights are only as good as "ink on the paper only". Why do they get away with it? Our studies show the following reasons enable them to do so:

1. Buyers are financially and psychologically ill-prepared to take developers to court. For the ordinary house buyer, filing a lawsuit is likely to be a major and traumatizing life experience. Not only that, by the the time they have purchased their houses, they would be financial drained and have no more resources to seek legal redress. 

2. No proper channel to register their complaints. Having placed complete faith and trust in the Regulated SPA and after having fulfilled their part of the terms and conditions in the contract, it usually comes as a shock to the house buyers when the developers do not comply with their part of their bargain. The Ministry of Housing does not have any clear-cut system to assist buyers in their predicament and adds to the confusion when, on the one hand, it tells complainants to seek legal redress, but on the other, advises them to bring up complaints to the Ministry.

3. Buyers are taken in by developer's sob-stories. The assumption that house buyers are out to get a “bonus” instead of it being their right to a claim is preposterous. Developers often paint a picture of financial difficulties and would come up with all sorts of excuses to avoid paying. If it is going to be painful for developers to pay LAD to the house buyers, it is natural that avoidance should be practiced in the first place.

4. "No-win" decisions do not inspire buyer confidence. House buyers' frustration reaches the peak when in some instances the Court rules in favour of the developer and the house buyers are left with no compensation and a big deficit in their saving accounts. Over the years, developer's solicitors have raised various defences or legal issues covered under some other legislation - for example the Contract Act 1960 and the Civil Law Act 1956 - that are to the advantage of developers.