It is not always the case that purchasers can claim for liquidated damages against developers if the latter fail to deliver vacant possession. Our Tan Min Lee and Tan Lay Keng discuss this further with a reference to the case of Chin Kok Woo & Others v Sky Park Properties Sdn Bhd & Others.
The Federal Court’s decisions in Ang Ming Lee & Others v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Another and Other Appeals(1) and PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Another(2) appear to have given hope to purchasers in their attempts to claim liquidated damages against developers if the latter fail to deliver vacant possession within the timeline stipulated in the sale and purchase agreement (SPA). However, purchasers ought to consider circumstances such as res judicata (ie, whether the claim has previously been made with the housing tribunal) before they pursue such claims.
In the case of Chin Kok Woo & Others v Sky Park Properties Sdn Bhd & Others,(3) the High Court discussed the circumstances in which purchasers are not entitled to bring an action against developers and related parties.
The plaintiffs were purchasers of units at a development known as Skypark in Cyberjaya (the project). The first defendant and the third defendant were the developer and architect of the project, respectively, while the second defendant was the owner of the land.
The plaintiffs alleged that the first and second defendants had failed to deliver vacant possession because the defendants had not delivered a valid certificate of completion and compliance (CCC). In particular, they had issued form F1 (ie, a partial CCC) instead of form F (ie, full CCC) when delivering vacant possession. The plaintiffs also relied on:
- clause 26 of the SPA, which allowed for vacant possession to be delivered only when a CCC was issued; and
- section 3 of the Housing Development (Control and Licensing) Act 1966 (HDA 1966), which states that only form F is recognised as an acceptable CCC and does not include form F1.
As a result, the plaintiffs argued that they were entitled to reopen the issue and claimed further liquidated ascertained damages (LAD) against the defendants from the date of booking of purchase of the property until the date of issuance of form F, as held in PJD Regency Sdn Bhd. The plaintiffs further asserted that the HDA 1966 is a social legislation and, therefore, the first defendant had been wrong to rely on the settlement agreements into which it had entered previously. As a result, the plaintiffs were still entitled to claim further LAD.
The High Court’s decision covered several issues. This article outlines two key points.
Was the vacant possession delivered in accordance with the SPA and applicable law?
The Court did not merely look at the title of the issued form, but also whether the first defendant had satisfied the requirements to deliver vacant possession in accordance with:
- sections 25 to 28 of the Street, Drainage and Building Act, Selangor Uniform Building By-Laws 1986; and
- clause 26 of the SPA.
The Court held that although form F1 had been issued instead of form F, the third defendant had certified that the aforementioned requirements had been fulfilled and that the building was fit and ready for occupation. The Court also clarified that the plaintiffs had not been in a position to decide the required form to be issued by the architect, as this would have defeated the purpose of having him carry out his duties to ensure that the project was safe and ready for occupation.
Secondly, considering that the joint management body had been set up, the Court further held that if vacant possession had not been delivered, the local authority would not have allowed the developer to set up such a body in accordance with section 17 of the Strata Management Act 2013.
Lastly, the Court considered clause 25(3) of the SPA, which stated that the plaintiffs were only allowed to initiate their claim for LAD when vacant possession of the units had been given to them. The plaintiffs’ attempt to reopen the issue of late delivery in the present claim indicated that vacant possession had been given to them.
Were the plaintiffs entitled to claim further LAD?
In deciding on the issue of LAD, the Court held that the PJD Regency Sdn Bhd case was inapplicable in the present case as the plaintiffs and the first defendant had earlier entered into settlement agreements to finalise the LAD claim. Having considered the cases of Pinpoint Consortium (M) Sdn Bhd v Mammoth Empire Land Sdn Bhd(4) and Obata Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd & other cases,(5) the Court ruled that settlement agreements executed by parties were binding.
Moreover, the plaintiffs had been paid in full as a result of the settlement agreements and, thus, they were barred from making any further claims in relation to the late delivery. The Court rejected the plaintiffs’ argument that the settlement agreements had no legal effect on the basis that they had deprived house buyers of their statutory rights. It was further found that the plaintiffs were not allowed to reopen the issue of LAD given that the claims had been resolved before the Housing Tribunal and that the plaintiffs had not appealed the Housing Tribunal’s decision.
The Court further noted that the duty to deliver the property in accordance with the SPA lay with the first defendant and that no claim was maintainable against the second or third defendants. In light of the above, the Court ultimately dismissed the claims against all three defendants.
While the HDA 1966 is a piece of social legislation, the High Court’s decision serves as a reminder that it protects purchasers to a certain extent and does not leave developers without redress. This case also serves as a caution that the Court will be unlikely to entertain parties that intend to reopen claims which have already been litigated before a competent tribunal or have been settled amicably by way of settlement agreements.
For further information on this topic please contact Tan Min Lee or Tan Lay Keng at Gan Partnership by telephone (+603 7931 7060) or email (email@example.com or firstname.lastname@example.org). The Gan Partnership website can be accessed at www.ganlaw.my