CHAI LAI FOOK & 18 ORS V. SENTUL RAYA
SDN BHD
HIGH COURT [KUALA LUMPUR]
TEE AH SING , J
SAMAN PEMULA NO; S5-24-225-2003
15 JULY 2004
DALAM MAHKAMAH TINGGI MALAYA DI KUALA LUMPUR
(BAHAGIAN SIVIL) SAMAN PEMULA NO; S5-24-225-2003
Dalam perkara Klausa 22 dan 24 pada Perjanjian Jual Beli bertarikh 17hb
April 1997; Suratikatan Penyerahhakkan bertarikh 22hb Mei 2002; Perjanjian
Jual Beli bertarikh 23.5.97; Suratikatan Penyerahhakkan bertarikh 20.5.02;
Perjanjian Jual Beli bertarikh 7.12.95; Suratikatan Penyerahhakkan kembali
terhad bertarikh 30.8.02; Perjanjian Jual Beli bertarikh 27.7.96;
Suratikatan Penyerahhakkan kembali bertarikh 1.10.02; Perjanjian Jual Beli
bertarikh 28.4.97; Suratikatan Penyerahhakkan kembali bertarikh 1.10.02;
Perjanjian Jual Beli bertarikh 24.9.95; Suratikatan Penyerahhakkan kembali
bertarikh 10.10.02; Perjanjian Jual Beli bertarikh 2.10.95; Suratikatan
Penyerahhakkan kembali terhad bertarikh 23.10.02; Perjanjian Jual Beli
bertarikh 9.8.96; Suratikatan Pelepasan Can Penyerahhakkan kembali bertarikh
16.8.02; Perjanjian Jual Beli bertarikh 3.6.96; Perjanjian Jual Beli
bertarikh 11.11.96; Perjanjian Jual Beli bertarikh 11.11.96; Perjanjian Jual
Beli bertarikh 8.7.96; Suratikatan Penerimaan dan Penyerahhakkan kembali
bertarikh 17.7.2002
DAN
Dalam perkara Seksyen 24 Akta Pemaju Perumahan (Kawalan dan Perlesenan)
1966
S5-24-225-03
2
Alasan
DAN
Dalam perkara Peraturan 11 Peraturan-Peraturan Pemaju Perumahan (Kawalan
dan Perlesenan) 1989
DAN
Dalam perkara Kaedah 7 & 28 Kaedah-Kaedah Mahkamah Tinggi 1980
DAN
Dalam perkara Seksyen 41 Akta Relil Spesifik 1950
ANTARA
1. CHAI LAI FOOK
2. TAY KENG MENG
3. CHAI MOI CHEW
4. LOW CHONG HOO
5. LEE SUT VAN
6. KHOR CHAI SENG
7. CHUAH TIM MOOI
8. ABD. HAMID BIN JONED
9. FUZIAH BINTI HUSAIN
10. KWA AH KEE @ KWA HOCK KEE
11. KWAHWEELIAN
12. AMUTHAMBIGAIA/P THARMARAJAH
13. SATWANT SINGH A/L UDHAM SINGH
14. SILVENDAR KAUR A/P PERITAM SINGH
15. TEO AH KOON
16. LIM THIAM CHYE
17. KOKYOKEKIENG
18. ONG LIP THENG
19. LAI JIN FANG
PLAINTIF-PLAINTIF
Alasan
DAN
SENTUL RAYA SDN BHD
DEFENDAN
ALASAN PENGHAKIMAN OLEH YANG ARIF HAKIM DATO' TEE AH SING
This is an application by the Plaintiffs by originating summons
(Enclosure 1) for the following orders:
(a) a declaration that the purported termination by the Defendant of the Sale and Purchase Agreements entered between the Plaintiffs and the Defendant was and is invalid and void;
(b) that the Defendant pay the Plaintiffs liquidated damages to be calculated from day to day at the rate often per centum' ,(10%) per annum of the purchase price arising from the Defendant's failure
to hand over vacant possession of the condominium units to the Plaintiffs within the time prescribed in the respective Sale and Purchase Agreements;
(c) that the Defendant pay the Plaintiffs liquidated damages to be calculated from day to day at the rate often per centum (10%) per annum of the last twenty per centum (20%) of the purchase price arising from the Defendant's failure to complete the common facilities within the time prescribed in the respective Sale and Purchase Agreements;
(d) a declaration that the Plaintiffs are entitled to set-off the
remaining purchase price to be paid to the Defendant against such liquidated damages found due from the Defendant to the Plaintiffs under (b) and (c) above;
(e) an Order for payment by the Defendant to the Plaintiffs of all sums found to be due from the Defendant to the Plaintiffs after having set-off the remaining purchase price to be paid to the Defendant against the liquidated damages found due under (b) and (c) above;
(f) that the Defendant pay the Plaintiffs liquidated damages to be calculated from day to day at the rate often per centum (10%) per annum of the purchase price from the date of this Order to the date of
actual delivery of vacant possession of the condominium units to the
Plaintiffs;
(g) that the Defendant pay the Plaintiffs liquidated damages to be calculated from day to day at the rate often per centum (10%) per annum
of the last twenty per centum (20%) of the purchase price from the date of
this Order to the date of actual completion of the common facilities;
(h) an Order that the Defendant delivers vacant possession and complete the common facilities of the condominium units to the
Plaintiffs;
(i) a declaration that the Defendant is not entitled to claim interest on
late payments as of 31.1.1998 being the date where all works on the Sang Suria condominium Projects came to a complete, standstill;
A Defendant's Affidavit (No. 2) was affirmed by Hamidah binti Maktar on
22.8.2003 (Enclosure 6) in reply to Enclosure 5.
An Afidavit Plaintif-Plaintif (No. 3) was affirmed by Ong on 3.10.2003
(Enclosure 7).
The facts of the case are as follows:
By the sale and purchase agreements made between the Plaintiffs and the
Defendant, the Plaintiffs agreed to purchase condominium units from the
Defendant - the developer. The sale and purchase agreements were in
accordance with Schedule 'H' to the Housing Developers (Control and
Licensing) Regulations 1989 ('the Housing Regulations') which were in turn
made under the Housing Developers (Control and Licensing) Act 1966 ('the
Housing Act').
By Clauses 22(1) and 24(1) of the sale and purchase agreements, the Defendant agreed to hand over vacant possession of the condominium
units to be erected by the Defendant to the Plaintiffs and the Defendant too
agreed to complete the common facilities within 36 calendar months from the date of the sale and purchase agreements. Clause
7 of the sale and purchase agreements stipulate, as an express term, that
time should be deemed to be the essence of the contract. By Clause 22(2) of
the sale and purchase agreements, it was an express term that if the
Defendant failed to hand over vacant possession of the condominium units
within the 36 calendar months, the Defendant shall pay immediately to the
Plaintiffs liquidated damages to be calculated from day to day at the rate
of 10% pa of the purchase price. By Clause 24(2) of the sale and purchase
agreements, it was an express term that if the Defendant failed to complete
the common facilities within the 36 months, the Defendant shall pay
immediately to the Plaintiffs liquidated damages to be calculated from day
to day at the rate of 10% pa of the last 20% of the purchase price. Sadly,
36 months have past and gone and the Defendant has yet to hand over vacant
possession of the condominium units to the Plaintiffs and to complete the
common facilities. For these reasons, and relying on Clauses 22 and 24 of the sale and purchase agreements, the Plaintiffs said that the Defendant was liable to pay the Plaintiffs a total sum of RM 956,372.68 as liquidated
damages calculated up to 13.2.2002 and continuing.
Now, pursuant to Clause 22 of the sale and purchase agreements, the
particulars of the liquidated damages were itemized as follows:
Lot No. Date of Sale & Purchase Agreement Purchase Price (RM) Delivery
Date for Vacant Possession LAD
As at 13. 2.02 (RM) 1st Plaintiff Cl A/09-5 17.4.97 229,339.00 17.4.00
41,972.18 2nd and 3rd Plaintiffs CIA/12-5 23.5.97 241,927.00 23.5.00
41,889.83 4th and 5th Plaintiffs CIA/06/1 7.12.95 240,120.00 7.12.98
76,641.04 6th and 7th Plaintiffs C1B/15/3 27.7.96 295,124.00 27.7.99
75,357.69 8th and 9th Plaintiffs C1B/02/1 28.4.97 212,877.90 28.4.2000
38,259.70 10th and 11th Plaintiffs Cl A/1 8/6 24.9.95 295,928.00 24.9.98
100,372.29 12th Plaintiff C IB/09/04 2.10.95 271,091.00 2.10.98 110,738.82
13th and 14th Plaintiffs Cl A/09/4 3.6.96 258,182.00 3.6.99 69.815.24 15th
Plaintiff CIA/19/6 11.11.96 380,572.00 11.11.99 86,123.96 16th and l7th
Plaintiffs Cl A/22/3 11.11.96 394,768.00 11.11.99 89,336.54 18th and 19th
Plaintiffs Cl A/08-6 8.7.96 254,848.00 8.7.99 66,469.94 Total Amount Due and
Owing to the Plaintiffs under Clause 22 796,977.23
Whereas, pursuant to Clause 24 of the sale and purchase agreements, the
particulars of the liquidated damages were listed as follows:
Lot No. Date of Sale & Purchase Agreement Last 20% of the Purchase Price
(RM) Completion date for the Common Facilities LAD As at 13.2.02 (RM) 1st
Plaintiff Cl A/09-5 17.4.97 45,867.80 17.4.00 8,394.44 2nd and3rd Plaintiffs
CIA/12-5 23.5.97 48,385.40 23.5.00 8,377.96 4th and 5th Plaintiffs CIA/06/1
7.12.95 48,024.00 7.12.98 15,328.21 6th and 7th Plaintiffs C1B/15/3 27.7.96
59,024.80 27.7.99 15,071.54 8th and 9th Plaintiffs C1B/02/1 28.4.97
42,575.58 28.4.00 7,651.94 lOth and 11th Plaintiffs CIA/18/6 24.9.95
59,185.60 24.9.98 20,074.46 12th Plaintiff C IB/09/04 2.10.95 54,218.80
2.10.98 22,147.76 13th and l4th Plaintiffs Cl A/09/4 3.6.96 51,636.40 3.6.99
13,963.05 15th Plaintiff Cl A/1 9/6 11.11.96 78,953.60 11.11.99 17,224.80
16th and 17th Plaintiffs Cl A/22/3 11.11.96 78,953.60 11.11.99 17,867.30
18th and 19th Plaintiffs Cl A/08-6 8.7,96 50,969.60 8.7.99 13,293.99 Total
Amount Due and Owing to the Plaintiffs under Clause 24 159,395.45 Lee in
paragraph 5 of Enclosure 4 has averred that the 10th and
11th Plainitffs have not" settled the last 35% of the progressive billing
for the sum of RM103,574.80 and interest of RM6,721.21 for late payment. Lee
also averred that the 13th and 14th Plaintiffs have not settled the last 35% of the progressive billing for the sum of RM90,363.70 and interest
for late payment of RM6,601.96. As for the 16th and 17th Plaintiffs they
have not settled the last 20% of the progressive billing for the sum of
RM78,953.60 and late interest payment of RM4,034.22. As for the 18th and
19th Plaintiffs they have not settled the last 35% of the progressive
billing for the sum of RM89,196.80 and late interest payment of RM5.818.13.
Ong in paragraph 6 of Enclosure 5 has averred that the 10th, 11th, 13th,
14th, 16th to 19th Plaintiffs do not owe the Defendant the sums as alleged
by the Defendant at paragraph 5 of Enclosure 4. This is because they have
elected to exercise their right to set-off the progress payments against
liquidated damages payable by the Defendant under Clauses 22(2) and 24(2) of
their Sale and Purchase Agreement.
The Defendant's record shows that the 1st, 2nd, 3rd, 6th, 7th, 10th, 11th, 15th, 16th, 17th, 18th and 19th Plaintiffs had previously given
notice of their intentions to claim liquidated damages against the Defendant for
late delivery, the said Plaintiffs' notices were given well after the expiry
of the respective times limited for delivery of vacant possession. Save for these said Plaintiffs, the Defendant's records do not appear to have any
notice from the other Plaintiffs of their intentions to claim such
liquidated damages.
Lee in Enclosure 4 has also averred that the Defendant is, and was at all
material times, a joint venture vehicle of Keretapi Tanah Melayu Bhd ('KTMB')
and YTL Land & Development Bhd (formerly known as Taiping Consolidated Bhd)
('YTL Land'). That YTL Land is a public listed company set up for the
purpose of developing a development known as Sentul Raya Development which
includes the portion of the development known as the Sang Suria Condominiums
wherein various sale and purchase agreements were entered into by the
Plaintiffs. It was averred by Lee that the delay in the completion of the
Plaintiffs' respective units were due to the economic downturn of the
country in 1997 to 1998 beyond the Defendant's control which seriously
affected the financial position of YTL Land and in turn that of the
Defendant with the result that, as each of the Plaintiffs were aware, all works on
the Sentul Raya Development came to a stop in January 1998. Lee further averred that in fact, many of the purchasers of the Defendant's
developments who had obtained financing to effect their purchases also had their financing facilities frozen thereby affecting their ability to
settle their progress billings. As a result thereto, it was averred that YTL
Land has had to undertake a scheme of arrangement pursuant to s 176 of the
Companies Act 1965 which scheme was also sanctioned by the Kuala Lumpur High
Court in 2001 as seen in Suit No DI-26-2 of 2001. It was averred that upon
the finalization of the restructuring exercises that it was possible for the
Defendant to continue with the development of the Sentul Raya Development as
a whole. The restructuring exercises included:
(a) a restructuring of the underlying project agreements with KTMB in
respect of Sentul Raya Development which was subject to the approvals of the
relevant authorities, namely, the Kuala Lumpur Stock Exchange, the
Securities Commission, the Economic Planning Unit of the Prime Minister's
Department and the Foreign Investment Committee; and
(b) an injection of fresh available funds.
Lee averred that the subject development which included the Plaintiffs'
units were expected to be completed sometime in September 2002.
Lee averred that if it were not for the YTL restructuring exercise, the
Defendant would not have been able to resume works on the Sentul Raya
Development and complete the construction of the Sang Suria Condominiums,
much less delivery vacant possession of the same sometime in 2002.
Lee also averred that with reference to the quantum of the liquidated
damages claimed by the Plaintiffs which amounts to between 20% to 40% of the
purchase price of each unit and that the liquidated damages claimed do not
amount to a reasonable compensation to the Plaintiffs of the loss
purportedly suffered by them as a resuslt of the present delay. Further with
the re-launch of the Sentul Raya Development as a whole, the property prices
of that area, including those properties bought by the Plaintiffs, can only improve.
Ong in paragraph 10 of Enclosure 5 has averred that the Defendant, had
applied to obtain a certificate under Regulation 11(3) of the Housing Regulations to extend the delivery date of the condominium
units but was refused by the Controller of Housing vide letter dated
29.11.2002 (exhibit "A-12").
The learned counsel for the plaintiffs has put in the Plaintiffs'
Submissions (No. 1) dated 6.10.2003.
The learned counsel for the Defendant has put in the Defendant's Reply
Submissions dated 19.11.2003.
The learned counsel for the Plaintiffs has put in the Plaintiffs'
Submissions (No. 2) dated 13.1.2004.
The learned counsel for the Defendant has put in the Defendant's Further
Reply dated 17.2.2004.
And finally the learned counsel for the Plaintiffs has put in the
Plaintiffs' Submissions"(No. 3) dated 26.2.2004.
I shall now deal with the matter before me. I have perused all the
written submissions of both the Plaintiffs and the Defendant. And I find
that all the main arguments and contentions in our case has also been raised
in the case of Hariram a/I Jayaram & Ors v Sentul Raya Sdn Bhd [2003] 1 MLJ
22 before his Lordship Abdul Malik Ishak J.
In the case of Hariram a/I Jayaram v Sentul Raya Sdn Bhd [2003] 1 MLJ 22
("Hariram's case") his Lordship Abdul Malik Ishak J (at pages 32 to 37) said
as follows:
"In opposing the plaintiffs' application in encl (1), the defendant
raised two legal issues for the determination of this court, namely:
(i) whether s 56(3) of the Contracts Act 1950 would operate to exclude a
claim for liquidated ascertained damages by reason of the failure on the
part of the plaintiffs to give the relevant notices to the defendant of
their intentions to claim liquidated ascertained damages at the time of
acceptance of later performance?
(ii) whether the terms of the sale and purchase agreements which were in
accordance with Schedule 'H' to the Housing Regulations which were made
under the Housing Act can be said to operate to entitle the plaintiffs to
liquidated ascertained damages in any event despite the provisions of s
56(3) of the Contracts Act of 1950 as to the requirement of the relevant notices?
In examining these two legal issues, it would be ideal to reproduce
verbatims 56 of the Contracts Act 1950 and that section enacts as follows:
Effect of failure to perform at fixed time, in contract in which time is
essential
(1) When a party to a contract promises to do a certain thing at or
before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time,
the contract, or so much of it as has not been performed, becomes voidable
at the option of the promisee, if the intention of the parties was that time
should be of the essence of the contract.
Effect of failure when time is not essential (2)If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do the thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by the failure.
Effect of acceptance of performance at time other than that agreed upon (3)If, in case of a contract voidable on account of the promisor's
failure to perform his promise at the time agreed, the promisee accepts performance of the promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of the acceptance, he gives notice to the promisor of his intention to do so.
Anant Singh J speaking for the Indian Supreme Court in the case of
Hindustan Construction Company v The State of Bihar (1963) AIR Patna 254
particularly at pp 258-259 of the report, had this to say in regard to the
requirement of extending a notice in the context of a voidable contract
where time was the essence of the contract:
The law on time being of the essence of the contract is to be found in s
55 of the Indian Contracts Act, which is as follows:
'When a party to a contract promises to do a certain thing at or before a
specified time, or certain things at or before specified times, and fails to
do any such thing at or before the specified time, the contract, or so much
of it as has not been performed, becomes voidable at the option of the
promisee, if the intention of the parties was that time should be of the
essence of the contract'.
It will be noticed, even such a contract, when time is of the essence of
the contract, is only voidable at the option of the promisee and does not
come to an end by itself after the expiry of the period. The promisee has to
terminate it by proper notice as provided in s 55 of the Act, otherwise the
option to avoid the contract will be deemed to have been waived and the
contract subsisting.
It can readily be appreciated that the equivalent of s 55 of the Indian
Contracts Act is our s 56 of the Contracts Act 1950. Now, in the context of
the present case, time was provided under the sale and purchase agreements between the parties to be of the essence and this can be seen in cl 7 of
the sale and purchase agreements which states as follows:
Time shall be the essence of the contract in relation to all provisions
of this agreement.
That being the case, Mr. Michael KT Chow, the learned counsel for the
defendant, submitted that at the expiry of the period of performance (which
would be on the original completion date) then the plaintiffs had, under s
56(1) of the Contracts Act 1950, the options to either terminate the sale
and purchase agreements or to continue with it. Mr. Michael KT Chow
submitted that if the plaintiff had chosen to terminate the sale and
purchase agreements, then the plaintiffs ought to give to the defendant
proper and express notices of termination. Mr. Michael KT Chow heavily
relied on the case of Hindustan Construction Company v The State of Bihar to
drive home the message that the sale and purchase agreements did not
automatically come to an end by itself just by reason of the expiry of the
original completion dates. So, it was pointed out that unless the plaintiffs
had given the defendant the proper and express notices of termination as
required, then the defendant was entitled to assume that the plaintiffs had
waived their options to avoid the sale and purchase agreements and that
agreements continued to subsist. Once that happened as it did here, and the
parties did not fix a fresh time for completion then, according to Mr.
Michael KT Chow, time became at large. It was because of this that it was
submitted that the defendant was entitled to rely on s 47 of the Contracts
Act 1950 and this meant that the defendant was allowed a leeway to complete
the development of the condominium units within a reasonable time. In short,
a reasonable time will be accorded to the defendant to complete the sale and
purchase agreements with the plaintiffs. Section 47 of the Contracts Act
1950 enacts as follows:
Time for performance of promise where no application is to be made and no
time is specified
Where, by the contract, a promisor is to perform his promise without
application by the promisee, and no time for performance is specified, the
engagement must be performed within a reasonable time.
Explanation - The question what is a reasonable time is, in each particular case, a question of fact.
and the ramifications of this section can be seen in the case of Hock
Huat Iron Foundry (suing as a firm) v Naga Tembaga Sdn Bhd [1999] 1 MLJ 65
where NH Chan JCA writing a separate judgment for the Court of Appeal aptly
said at p 77:
Therefore, since time was no longer of the essence of the contract by the
defendant's waiver of it by allowing time to pass, the contract could no
longer be avoided under s 56(1). However, since the plaintiff now had a reasonable time (s 47) to complete the project, compensation could not be
awarded for delay. This is because there could not be any delay as the
plaintiff had a reasonable time to complete and in fact, was allowed to
complete the project.
Flowing from all these arguments and applying them to the facts of the
present case, it was vigorously submitted that as the plaintiffs had allowed
time to pass beyond the original completion dates without raising a whimper,
then it must follow that the plaintiffs must have affirmed the sale and
purchase agreements. This meant that time was no longer of the essence and
that the defendant now had a reasonable time to complete the condominium
units and that no liquidated ascertained damages could be awarded for the
delay. It was also submitted that by virtue of s 56(3) of the Contracts Act
1950 that unless the plaintiffs had given the defendant the relevant notices
of their intentions to accept a later performance of the sale and purchase
agreements, the plaintiffs were not entitled to claim compensations for the
delay. This meant that the plaintiffs must have agreed that the defendant
may perform their promise at some other time, which has to be at a time
later than what the plaintiffs had so agreed - that is to say when
performance has not been completed yet. Abdul Aziz J (now JCA) in Sakinas
Sdn Bhd v Siew Yik Hau & Anor [2002] 5 MLJ 498 interpreted s 56(3) of the
Contracts Act 1950 in this way (see p 514 of the report):
In my opinion, the words 'at any time other than that agreed' do not
refer to the act of accepting performance of the promise, but refer to the
performance of the promise itself. The words 'If... the promisee accepts
performance of the promise at any time other than that agreed' do not mean
that performance has been delayed but is now completed and the promisee now,
at a time later than the agreed time, accepts the performance. If that were
so, and the promisee now gives notice of intention to claim compensation,
the notice cannot be of any practical use to the promisor, except to enable
him to know in advance that there will be a claim against him and he had
better get ready with the money to pay his lawyers, and the promisee, if the
promisee should succeed, which I do not think is the intended purpose of the
notice. The phrase really means, in my opinion, the promisee accepting,
meaning agreeing, that the promisor who has been in breach as to time may
perform his promise at some other time, which has to be a time later than
the time of the promisee's so agreeing. At the time of the promisee's so
agreeing, the performance has not been completed yet. The promisee says,
'It's all right. Although the contract is now voidable because of your
delay, I will not void it. You may complete it later, on such and such a
date. At the time that he says so, the promisee, if he wants to claim
compensation for the delay, must give notice of hs iention to claim
compensation, otherwise the promisor is entitled to assume that he w.ill not
be liable to any compensation. The notice is important as it will enable him
to come to a commercial decision whether it is viable for him to go on
performing if he is going to have to pay compensation.
It seems to me that the case of Sakinas Sdn Bhd v Siew Yik Hau & Anor
also lays down the principle that the notice is to be given when the
promisee expressly affirms the contract. In sharp contrast would be the case
of Hindustan Construction Company v The State of Bihar where there was no
necessity for such a requirement because unless expressly terminated, the
contract was said to continue to subsist. There was no question of a
positive act required on the part of the promisee to affirm the contract and
to that extent Sakinas differed from Hindustan Construction Company.
Still relying on Sakinas, it was pointed out that in that case his
Lordship Abdul Aziz J (now JCA) had held that the failure to give notice of
intention to claim compensation at that time would entitle the promisor to
assume that he will not be liable to pay any compensation. His Lordship was
of the view that the notice was crucial as 'it will enable him (the promisor)
to come to a commercial decision whether it is viable for him to go on
performing if he is going to have to pay compensation.' Using this passage
as a leverage, it was submitted on behalf of the defendant that s 56(3) of
the Contracts Act 1950 would operate to bar the plaintiffs from any claim
for liquidated ascertained damages by reason of the plaintiffs' failure to
give the requisite notices at the expiry of the original completion dates or
so soon thereafter, that would be at the point of time when the right to
rescission arose.
To buttress the defendant's stand that s 56(3) of the Contracts Act 1950
would aid the defendant in warding off the claim for liquidated ascertained
damages, it was argued that since the sale and purchase agreements were in
accordance with Schedule 'H' to the Housing Regulations which were in turn
made under the Housing Act, then that sale and purchase agreements took on a
legal nature similar to that of a piece of subsidiary legislation akin to
the Housing Regulations. Being a piece of subsidiary legislation, it Was
argued that the sale and purchase agreements governing the parties cannot
override the general application of the Contracts Act 1950. It was
emphasized that the provisions of the Contracts Act 1950 being a Federal law
must necessarily prevail and override the subsidiary legislation. My
attention was drawn to s 87(d) of the Interpretation Acts
1948 and 1967 which enacts as follows:
s.
When an [Act of Parliament,] Ordinance or Enactment confers power on any
authority to make subsidiary legislation, the^following provisions shall,
unless the contrary intention appears, have effect with reference to the
making ancf operation of such subsidiary legislation:
(d) no subsidiary legislation made under an Act of Parliament or
Ordinance shall be inconsistent with any [Act of Parliament or] Ordinance,
and no subsidiary legislation made under a State ... Enactment shall be
inconsistent with any Act of Parliament or Ordinance or Enactment.
and it was argued that this provision falls within Part II of the
Interpretation Acts 1948 and 1967, which by virtue of s 65 thereof, applies
to the Housing Act and the Housing Regulations. All these arguments were
highlighted by Mr. Michael KT Chow to show that the sale and purchase
agreements which bind the parties must not override and must be read in the
context of the Contracts Act 1950. Put differently, it was submitted that
being a subsidiary legislation the sale and purchase agreements cannot
override and must be subservient to the Contracts Act 1950. In a textbook
entitled Statutory Interpretation, A Code (3rd Ed) by FAR Bennion at p 174,
the following passage appears:
Must not conflict with law unless the enabling Act so provides, delegated
legislation cannot override any Act - and certainly not the enabling Act
itself (Re Davis, exp Davis (1872) 7 Ch App 526 at p 529). Indeed it is
taken not to be impliedly authorized to override any rule of the general law
(5 Co Rep 63a; Hall v Nixon (1875) LR 10 QB 152 at p 159; Rossi v Edinburgh
Corpn [1905] AC 21. See further Code s 58).
Applying this passage, it was argued that the subsidiary legislation like
the Housing Regulations was not only prohibited from expressly conflicting
or overriding the application of the general law such as the Contracts Act
1950 but it was further forbidden to even impliedly override the same. It
was further argued that even if ell 22(1) and 24(1) of the sale and purchase
agreements were applicable to allow compensation in the form of liquidated
damages, these clauses must be read with the provisions of the Contracts Act
1950, especially s 56(3) thereof. In other words, it was pointed out that
the plaintiffs must give the requisite notices of their intentions to claim
liqidated damages at the expiry of the original completion dates.
Mr. NV Sree Harry, the learned counsel for the plaintiffs, quite rightly
argued that this was a case where there was a blatant breach of the sale and
purchase agreements by the defendant in not completing the common facilities
and in not delivering vacant possession of the condominium units to the
plaintiffs within the 36 months and that this state of affairs was still
continuing. Mr. NV Sree Harry also pointed out that although it was open to
the defendant as the developer under the Housing Regulations to try and
persuade the Controller of Housing to vary the date of delivery of vacant
possession or even to vary the date of completion of the common'facilities,
yet the defendant as the developer made no attempts to do so. He further
submitted that the purchasers' claims - referring to the plaintiffs, were
essentially for liquidated damages based on the standard sale and purchase
agreements as found in Schedule 'H' of the Housing Regulations.
To me, the legal stand adopted by the defendant was this. That the
plaintiffs as the purchasers cannot claim compensations for late delivery
because at the expiry of the original completion dates, the plaintiffs did
not give to the defendant the requisite notices of their intentions to claim
compensations pursuant to s 56(3) of the Contracts Act 1950. But the plaintiffs through Mr. NY Sree Harry submitted that s 56(3) of the
Contracts Act 1950 did not apply to the plaintiffs because as purchasers,
the plaintiffs did not indicate to the defendant when the contracts became
voidable on the original completion dates, or so soon thereafter, that it
was acceptable to the plaintiffs if the defendant fulfilled their promise at
some other time. For his interpretation of s 56(3) of the Contracts Act
1950, Mr. NV Sree Harry relied on the case ofSakinas in particular to the
passages that were reproduced earlier as seen at p 514 of the MLJ reporting
and he too relied on the following passage at the same page in the judgment
of Abdul Aziz J (now JCA) in Sakinas:
In my opinion, sub-s (3) does not apply to the respondents unless when
the contract became voidable on 13 December 1997, or soon after that, they
indicated to the appellants that it was acceptable to them if the appellants
fulfilled their promise at some other time. There is no evidence as to that.
Flowing from that it was strenuously argued by Mr. NV Sree Harry that
just like the Sakinas' case, the present case too would bring it outside the
scope of s 56(3) of the Contracts Act 1950 because the plaintiffs did not
indicate to the defendant when the contracts became voidable on the original
completion dates, or so soon thereafter, that it was acceptable to the
plaintiffs if the defendant fulfilled their promise at some other time.
There was no evidence here that the plaintiffs did that.
It is pertinent to note that the facts in Sakinas are on all fours with
the facts of the present case. In that case, the purchaser brought an action
against the developer for liquidated damages when the developer failed to
hand over vacant possession of the apartment and to complete the common
facilities in time and the developer, just like the present case, attempted
to defeat the purchaser's claim for liquidated damages by contending that
since the purchaser did not give the developer notice of their intention to
claim compensation for late delivery pursuant to s 56(3) of the Contracts
Act 1950, the purchaser was not entitled to receive the compensation.
It must be borne in mind that the Housing Act is a specific piece of
social legislation to protect house buyers or purchasers from unscrupulous
developers. This was the thinking of the then Federal Court (Suffian LP,
Syed Othman and Abdul Hamid FJJ) in the case of SEA Housing Corporation Sdn
Bhd v Lee Poh Chee [1982] 2 MLJ 31, where Suffian LP speaking for-the .then
Federal Court aptly said at p 34 of the report:
It is common knowledge that in recent years, especially when government
started giving housing loans making it possible for public servants to
borrow money at 4% interest per annum to buy homes, there was an upsurge in
demand for housing, and that to protect home buyers, most of whom are people
of modest means, from rich and powerful developers, Parliament found it
necessary to regulate the sale of houses and protect buyers by enacting the
Act.
And at pages 39 and 40 his Lordship continued:
It would be correct to say, and I so say that the Contracts Act 1950 is a
piece of legislation of a general nature setting out the general law
governing contracts between the parties, in general. Whereas, the Housing
Act was enacted to 'provide for the control and licensing of the business of
housing development in West Malaysia and for matters connected therewith'.
In short, it is a piece of specific legislation governing the sale of houses
by a licensed developer. The plaintiffs' claims for liquidated ascertained
damages were not based on the general contract but rather on the standard
sale and purchase agreements as set out in accordance with Schedule 'H' to
the Housing Regulations which were made under the Housing Act. Seen in its
correct perspective, the present case was a tussle between the specific law
and the general law. On the need to accord precedence to a specific
provision, I had occasion to say in Folin & Brothers Sdn Bhd v Wong Foh Ling
& Wong Swee Lin & Ors [2001] 2 MLJ 23, especially at pp 41-42 of the report,
the following:
In my judgment, the specific provision must necessarily take precedent
over
the general provision"
And at page 41 his Lordship said:
6i Likewise here, the sale and purchase agreements made in accordance with
Schedule 'H' to the Housing Regulations which were in turn made under the
Housing Act must take precedence over the Contracts Act 1950. Being a
specific piece of social legislation enacted solely to protect house buyers from unscrupulous developers, the standard sale and purchase agreements
signed by the plaintiffs must take precedence over the Contracts Act 1950
and must be given effect accordingly.
" At pages 43 and 44 his Lordship said:
44 Put differently, in construing the standard sale and purchase agreements which the plaintiffs have signed with the defendant, one must examine the language employed therein and at the same time bearing in mind the
purpose of the Housing Act one must not purport to go around the Housing Act and the Housing Regulations so as to remove the protection accorded to the plaintiffs as house buyers by importing s 56(3) of the Contracts Act
1950. It would certainly be erroneous in the extreme to burden the plaintiffs as purchasers with the requirement of s 56(3) of the Contracts Act 1950 when the Housing Act and the Housing Regulations do not impose such a burden.
In my judgment, any attempt to impose such a burden will taint and remove the very protection which the Housing Act under which the Housing Regulations were made was enacted for. This certainly cannot be the law
of the country. Incidentally, if Parliament intended that the plaintiffs as purchasers must notify the defendant as developer of the plaintiffs'
intention to claim liquidated ascertained damages before making such a claim, then Parliament would have manifested that intention in the standard sale and purchase agreements which the plaintiffs have signed. The fact that there was no such requirement incorporated in the standard sale ,and purchase agreements showed, on the balance of probabilities, that Parliament had never intended to impose such a burden on the plaintiffs as the
purchasers of those condominium units. This conclusion is fortified by the words which Parliament employed in ell 22(2) and 24(2) of the standard sale and
purchase agreements "which/gad, inter alia, that 'the vendor shall pay immediately
to the purchaser liquidated damages.' To read and apply s 56(3) of 'the Contracts Act 1950 into a claim for liquidated ascertained damages that
was guaranteed under the Housing Act wherein the Housing Regulations were made would only lead to absurdity because it would remove the very protection that Parliament had guaranteed to the plaintiffs as purchasers
of the condominium units"
At pages 45 to 46 his Lordship said:
"If I am wrong in my approach, I have this to say. Section 56(3) of the
Contracts Act 1950 would only apply if and only if the plaintiffs as the
purchasers have indicated to the defendant as the developer when the
contracts became voidable and that would be on the original completion dates
or soon thereafter. Here, there was no evidence whatsoever of any indication
by the plaintiffs and for that reason s 56(3) of the Contracts Act 1950 do
not apply. No layman who purchases a property from a developer and who signs
the standard sale and purchase agreement just like the present plaintiffs
here did would be bothered to cross-check with the Contracts Act 1950 in
order to ascertain his legal right to claim for liquidated ascertained
damages. In the present case,cll 22(2) and 24(2) of the sale and purchase
agreements certainly give the present plaintiffs as the purchasers of the
condominium units the right to sue for liquidated ascertained damages
without the need to rescind the sale and purchase agreements. The language
employed in ell 22(2) and 24(2) of the sale and purchase agreements were
rather explicit and they are worded in this way:
Clause 22(2): If the vendor fails to hand over vacant possession of the
said parcel, to which water and electricity supply are ready for connection
to the said parcel, in time, the vendor shall pay immediately to the
purchaser liquidated damages to be calculated from day to day at the rate of
10% pa of the purchase price.
Clause 24(2): If the vendor fails to complete the common facilities in
time the vendor shall pay immediately to the purchaser liquidated damages to
be calculated from day to day at the rate of 10% pa of the last 20% of the
purchase price.
No one can deny that these words are clear and unambiguous and when couched in these terms the plaintiffs as the purchasers of the
condominium units have an immediate right to claim for liquidated damages without the need to rescind the sale and purchase agreements. Business efficacy must
be given to these words. Commercial effectiveness must be accorded to these sale and purchase agreements. I am asked to imply as a term of the
contract that s 56(3).pf the Contracts Act 1950 be read into the sale and purchase agreements entered between the plaintiffs and the defendant. I-am to say, however, that it is not sufficient to justify an implication simply
because it is reasonable to do so
I am also to say that it is essential that any term that is sought to be
implied must operate reasonably and equitably between the parties. Here
obviously for the reasons alluded to by me, to imply s 56(3) of the
Contracts Act 1950 into the sale and purchase agreements in order to shackle
the plaintiffs and benefit the defendant cannot be said to be reasonable and
equitable between the parties. In my judgment, an unreasonable or
inequitable term will and shall not be implied by this court.
All said and done, it was part and parcel of my judgment that the sale and purchase agreements between the parties were commercially effective without the need to imply s 56(3) of the Contracts Act 1950 into it"
And at page 47 his Lordship said:
"It was argued on behalf of the defendant that the standard sale and
purchase agreements as seen in Schedule 'H' of the Housing Regulations were
nothing more than mere contractual documents and that being the case it was
further argued that the normal rules of construction would apply in
construing such contractual documents. Now, taking these arguments in its
correct perspective and to its logical conclusion, it must be emphasized
that the word 'immediately' that appears in both ell 22(2) and 24(2) of the
sale and purchase agreements which have been reproduced earlier would mean
that the purchasers have the right to claim the liquidated ascertained
damages without giving the requisite notices to the defendant under s 56(3)
of the Contracts Act 1950. Being contractual documents, there can be little
or no argument at all that the defendant as the developer had agreed to
waive their right in respect of the notification requirement under s 56(3)
of the Contracts Act 1950. This was my judgment and I so hold accordingly,"
His Lordship has given an admirable and very reasoned judgment in
Hariram's case which I am in full agreement. And I hereby adopt and apply
the aforesaid to our case. I therefore reject all the contentions raised by
the Defendant.
The Defendant has raised the issue that because of the economic downturn
of this country that delayed the completion of the Project by almost three
years has frustrated the adventure embodied in the respective sale and
purchase agreements.
In other words the Defendant is relying on the doctrine of frustration
under section 57(2) of the Contracts Act 1950 to challenge the Plaintiffs'
claims.
Section 57(2) of the Contracts Act 1950 reads as follows:
"Contract to do act afterwards becoming impossible or unlawful.
(2)A contract to-do an act which, after the contract is made becomes impossible, or by reason of some event which the promisor could not
prevent, unlawful, becomes void when the act becomes impossible or
unlawful."
Regulation 11 of the Housing Regulations reads as follows:
"Contract of sale
(1) Every contract of sale for the sale and purchase of a housing accommodation together with the subdivisional portion of land appurtenant thereto shall be in the form prescribed in Schedule G and where the contract of sale is for the sale and purchase of a housing accommodation in a subdivided building, it shall be in the form prescribed in Schedule H.
(2) No housing developer shall collect any payment by whatever name called except as prescribed by the contract of sale.
(3) Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive or modify such provisions:
Provided that no such waiver or modification shall be approved if such
application is made after the expiry of the time stipulated for the handing
over of vacant possession under the contract of sale or after the validity
of any extension of time, if any, granted by the Controller."
The word "Controller" is defined under section 3 of the Housing Act to
mean "the Controller of Housing appointed under section 4".
Under Regulation 11(3) of the Housing Regulations the Defendant may be able to escape liability for liquidated damages for late delivery provided that the Defendant make the application before the expiry of the
time stipulated for the handling over of vacant possession under the contract of sale or after the validity of any extension of time, if any,
granted by the Controller of Housing.
In Hariram's case the Defendant did not apply to the Controller of
Housing under Regulation 11(3) of the Housing Regulations for extention of
time to deliver vacant possession. However in our case the Defendant had
applied to the Controller of Housing for a certificate to extend the time
for the delivery and completion of the condominium units but the Controller
of Housing has rejected the Defendant's application and refused to grant the
certificate extending time.
In my view it would not be prudent for this Court to accept the defence
of frustration under section 57(2) of the Contracts Act 1950 and allow the
Defendant to escape liability for the delay in delivering vacant possession
of the condominium units as the Controller of Housing has rejected the
Defendant's application for an extention of time to deliver vacant possession. "To do so would be tantamount to creating another avenue for the Defendant to escape liability for late delivery of vacant
possession of the condominium units which Parliament had never intended nor
provided for in the Housing Act or the Housing Regulations." Further to allow the defence of frustration to succeed
would amount to this Court to override the decision of the Controller of
Housing in refusing to grant the certificate for extension of time to
deliver vacant possession of the condominium units given under Regulation
11(3) of the Housing Regulations.
As such I reject the defence of frustration.
In view of the aforesaid I granted orders in terms of Enclosure 1.
Exhibit "A2" (at pages 31 to 33 of Enclosure 2) is the notice dated
30.9.2002 sent by the Defendant to the 18th Plaintiff stating that "the
above property purchased by you has been duly completed and the vacant
possession of the said property can now be delivered to you."
In the same notice it is also stated that "Further, you shall be deemed to have taken possession of the same, upon the expiry of fourteen (14) days from date hereof."
However I ordered that liquidated damages to be calculated up to 14 days
after the date stated in the notice (Exhibit "A2") dated 30.9.2002 for the
Plaintiffs to take delivery of vacant possession. I also ordered that costs
to be taxed.
DATO' TEE AH SING Hakim Mahkamah Tinggi Bahagian Sivil Kuala Lumpur.
Bertarikh: 15.7.2004
Didengar pada 10.9.2003 dan 5.3.2004. Keputusan pada 20.4.2004.
Encik Sree Harry bagi Plaintif-Plaintif Tetuan Sri Ram & Co. Peguambela
dan Peguamcara Suite 12.01-12.02 Tingkat 12, Wisma E & C No. 2, Lorong
Dungun Kiri Damansara Heights 50490 KUALA LUMPUR.
Cik Sylvia Cotter bagi Defendan Tetuan Logan Sabapathy & Co. Peguambela
dan Peguamcara Suite 2002, 20th Floor Wisma Hamzah-KH No. 1, Leboh Ampang
50100 KUALA LUMPUR |