LOH WAI LIAN V. SEA HOUSING CORPORATION SDN BHD

PRIVY COUNCIL [APPEAL FROM MALAYSIA]

APPEAL NO 39 OF 1985

LORD BRIDGE OF HARWICH, J, LORD TEMPLEMAN, J, LORD GRIFFITHS, J, LORD MACKAY OF CLASHFERN, J & LORD OLIVER OF AYLMERTON, J

9 FEBRUARY 1987, 3 MARCH 1987

Lord Oliver of Aylmerton

(delivering the Judgment of the Board): In 1966 there was introduced in West Malaysia a scheme for the protection of purchasers of new houses and for the control and licensing of housing developers. Its provisions are contained in the Housing Developers (Control and Licensing) Act 1966 (Act 118). The Act laid down stringent provisions for licensing developers and in section 24 conferred upon the Minister of Local Government and Housing power to make regulations which might (inter alia) "regulate and prohibit the conditions and terms of any contract between a licensed housing developer, his agent or nominee and his purchaser." That power was exercised by the Housing Developers (Control and Licensing) Rules 1970 which came into force on July 15, 1970. Rule 12(1) provided:

"Every contract of sale shall be in writing and shall contain within its terms and conditions provisions to the following effect, namely …"

There followed a list of twenty-one matters which were required to be contained in the contract, the relevant ones for present purposes being the following:

"(o) Provisions specifying the date of delivery of the vacant possession of the housing accommodation to the purchaser which date shall be not later than 18 months after the date of signing of the contract of sale; …

(r) Provisions binding on the licensed housing developer that he shall indemnify the purchaser for any delay in the delivery of the vacant possession of the housing accommodation. The amount of indemnity shall be calculated from day to day at the rate of not less than eight per centum per annum of the purchase price commencing immediately after the date of delivery of vacant possession as specified in the contract of sale:"

Rule 12(2) conferred on the Controller (an office established by the Act) power to waive or modify the provisions of role 12(1) in respect of any contract of sale if he was satisfied that special circumstances rendered compliance with that Rule impracticable or unnecessary.

The respondent is a corporate licensed housing developer which, on March 18, 1974, entered into a contract with the appellant for the purchase of a shophouse to be erected on a housing estate at a price of 175,000 Malaysian Ringgit, payable by stage payments as the building proceeded in accordance with clause 3 of the contract. Clause 17 of the contract was in the following terms:

"Subject to clause 32 hereof and/or to any extension or extensions of time as may be allowed by the Controller the said building shall be completed and ready for delivery of possession to the purchaser within eighteen (18) calendar months from the date of this Agreement. Provided always that if the said building is not completed and ready for delivery of possession to the purchaser within the aforesaid period then the vendor shall pay to the purchaser agreed liquidated damages calculated from day to day at the rate of eight per centum (8%) per annum on the purchase price of the said property from such aforesaid date to the date of actual completion and delivery of possession of the said building to the purchaser."

Clause 32, which has an historical significance in the events leading up to this appeal, was a clause which purported to exonerate the respondent from liability for failure to perform the contract for causes outside the respondent's control including inter alia disability of contractors or subcontractors employed by the respondent.

In fact the building was not completed on the due date, i.e. September 18, 1975. Possession was not finally delivered until November 7, 1977, On April 21, 1980, the appellant by a letter from the solicitors demanded payment of the sum of $29,972.01, a sum equal to interest at 8% per annum on the full price of $175,000 calculated for a period of twenty five months and twenty one days. The respondent's solicitors replied on April 26, 1980, repudiating liability for the sum claimed and basing themselves on clause 32 of the contract, alleging unavoidable shortages of sub-contractors and building materials. That defence was never put to the test and there the matter rested for the moment.

On March 19, 1982, however, the Federal Court delivered judgment in a case of SEA Housing Corporation Sdn Bhd v Lee Poh Choo [1982] 2 MLJ 31 which concerned a contract with the respondent containing, as clause 32, provisions identical with those of clause 32 in the contract with which this appeal is concerned. The Federal Court there held that clause 32 was void since it contradicted provisions expressly required to be inserted in the contract by rule 12(1) of the 1970 Rules and, in particular, paragraphs (o) and (r) of that rule. Whilst it was permissible for details not specifically mentioned in the Rules to be inserted into individual contracts, such details had to be consistent with the Act and the Rules. The defence adumbrated by the respondent's solicitors in their letter of April 26, 1980, therefore fell to the ground and on September 9, 1982, the appellant issued a specially endorsed writ claiming a sum of $29,874.65 (being 8% per annum on $175,000 over 779 days) together with interest from July 27, 1982. Why the claim for interest was limited by reference to this latter date is unclear. A summons for summary judgment was subsequently issued and was heard before the Senior Assistant Registrar on April 14, 1983, when judgment for the sum claimed and interest was entered in favour of the appellant. From that judgment the respondent appealed to the Judge in Chambers and on September 29, 1983 Mohamed Dzaiddin J. allowed the appeal and dismissed the appellant's claim, holding that it was statute-barred under the provisions of section 6(1)(a) of the Limitation Ordinance 1953. That section provides:

"Save as hereinafter provided the following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued, that is to say — (a) actions grounded on a contract or on tort …"

The judge's view was that the appellant's cause of action had accrued on September 18, 1975, when the period of eighteen months prescribed by the contract expired, and that accordingly her writ was eleven months out of time. The appellant appealed to the Federal Court which, on February 23, 1984, dismissed her appeal. The grounds upon which the appeal was dismissed were contained in a written judgment of Mohamed Azmi F.J. delivered on June 28, 1984. From that judgment the appellant now appeals to their Lordships' Board pursuant to special leave granted on December 17, 1984.

The reasoning both of Mohamed Dzaiddin J. and of the Federal Court was that since the sum claimed was no more than damages for breach of contract to be ascertained by agreement between the parties on a particular basis the appellant's cause of action accrued immediately she was in a position to issue a writ claiming damages for failure to complete on the due date, even though it was impossible at that time to quantify the amount of her claim or to recover judgment for the amount which the respondent, in the event, became obliged to pay. That date was the date on which, under clause 17 of the contract, the building ought to have been completed. The provision for payment of liquidated damages was merely a formula for the quantification of the claim which then accrued and accordingly the entire claim of the appellant became barred on September 18, 1981, so that she was entitled to nothing.

A construction which would import into the clause a fresh obligation on the vendor to pay the calculated amount at the end of each day would be capricious, involving as it does a series of breaches of contract as each day passes without payment being made. The whole tenor of the clause is, in their Lordships' view, that the vendor is assuming as a matter of contract and subject to the occurrence of the condition precedent that the building remains uncompleted on the stipulated date, an express contractual obligation to pay a single sum which cannot become due, because it cannot be ascertained, until the building has been completed and possession can be delivered. If the question is asked "in the absence of such an express provision when would the purchaser's right of action for damages for breach of contract accrue?", the answer is plainly the date on which the breach occurred. But parties to a contract are, of course, entitled to regulate or modify their rights in the event of breach in any way that they think fit and the accrual of any cause of action then becomes a matter of the correct construction of what they have provided. This appeal raises no point of principle but simply a question of what is the true construction of the contract in which the parties entered. In their Lordships' judgment, the only sensible construction of clause 17 is, as Mr. Kidwell has contended, that it imposes an obligation to pay, in substitution for any other right to damages which the purchaser might otherwise have, a single sum to be calculated and ascertained at a particular date and that until that sum has been ascertained it does not become due and cannot be sued for.

Their Lordships will accordingly advise His Majesty the Yang di-Pertuan Agong that the appeal should be allowed and that the order of the Senior Assistant Registrar should be restored. The respondent must pay the costs before their Lordships' Board and in the courts below.