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1 MLJA 19, *; [2007] 1 MLJA 19

© 2003 LexisNexis Asia (a division of Reed Elsevier (S) Pte Ltd)The Malayan Law Journal

Articles

2007

Volume 1

[2007] 1 MLJ xix; [2007] 1 MLJA 192007 1 MLJ xix; 2007 1 MLJA 19

2007Article: DELAY IN THE COMPLETION OF A NEW RESIDENTIAL PROPERTY:

RIGHTS OF THE PURCHASERChan Wai Meng LLB (Hons) (Malaya), LLM

(Malaya)Lecturer, Department of Business Strategy and PolicyFaculty of Business and

Accountancy, University of Malayaand

Usharani Balasingam LLB (Hons) (Malaya), LLM (Malaya)Lecturer, Taylor s CollegeSubang Jaya

[*19]

[Some parts of this paper were presented at the INTI Inaugural Law Conference 2006 which

was held from 28-29 August 2006. The theme of the conference was Towards Developing

Legal Awareness and Justice in our Malaysian Society . The INTI Inaugural Law Conference

was sponsored by LexisNexis]

Introduction

According to the statistics issued by the Monitoring and Enforcement Division of the Ministry

of Housing and Local Government, there were 261 abandoned housing projects in West

Malaysia for the period commencing from the year 1990 to December 2005. 58,685

purchasers were affected 1. This paper discusses the rights of a purchaser of a residential

property that are conferred on him by the Housing Development (Control and Licensing) Act

1966 (Act 118) and its subsidiary legislation. For ease of reference, the Housing Development(Control and Licensing) Act 1966 will be referred to as the Housing Development Act 1966 in

this paper.

In this paper, the writers will emphasis on the issues whether the purchaser has the right to

claim for damages and to terminate the sale and purchase agreement when there is a delay in

the delivery of vacant possession of the property. The writers will also examine the avenues

available to the purchaser if he wishes to initiate legal action against the developer. It will be

shown that the position of the purchaser is vulnerable and thus, the writers will conclude this

paper with some recommendations to strengthen the purchaser s position. [*20]

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Housing Development Act 1966

According to the long title of the Housing Development Act 1966, the Act was enacted to

provide for the control and licensing of the business of housing development in West

Malaysia and for matters connected therewith. The matters include the protection of

purchasers of new residential properties2

. In fact, the act is a specific piece of legislation toprotect house buyers from unscrupulous developers 3.

In 2002, the Housing Development Act 1966 was amended to further enhance the protection

conferred on the purchasers of new residential properties. The amendments came into effect

on 1 December 2002. The Housing Developers (Control and Licensing) Regulations 1989 was

also amended at the same time. The Regulations was renamed the Housing Development

(Control and Licensing) Regulations 1989. For ease of reference, the amended regulations

will be referred to as the Housing Development Regulations 1989 in this paper. There are

reports that the Housing Development Act 1966 and the Housing Development Regulations

1989 will be further amended 4. In this paper, the writers will examine the provisions in the

said legislation as at 30 June 2006.

The Housing Development Act 1966 applies to regulate the business of a housing

development in West Malaysia. What is a housing development is defined in s 3 of the Act to

mean:

Develop or construct or cause to be constructed in any manner more than four units of

housing accommodation and includes the collection of moneys or the carrying on of any

building operations for the purpose of erecting housing accommodation in, on, over or under

any land; or the sale of more than four units of housing lots by the landowner or his nominee

with the view of constructing more than four units of housing accommodation by the said

landowner or his nominee.

Further, the term housing accommodation is also defined in s 3 to exclude an accommodation

erected on any land designated for approval for commercial development. Thus, the Housing

Development Act 1966 regulates the business of constructing more than four units of housing

accommodation on a land designated for or approved for residential purpose.

The writers will summarise below some of the features in the Housing Development Act 1966

which were enacted with the intention to protect a purchaser. First and foremost, s 5 of the

Act clearly stipulates that only a person who has been licensed by the Controller of Housing

may carry on the business of housing development in West Malaysia. One of the current

[*21conditio] for the grant of the licence is that the applicant must have deposited at leastRM250,000 with the controller 5. In addition, if the applicant is a company, its minimum

issued and paid up capital in cash is RM250,000 6. Further, s 6(1)(c), (d) and (e) of the Act

provide that the controller will not grant a license if the applicant or the applicant s director,

manager or secretary had been convicted of an offence under the Act and sentenced to a fine

exceeding RM10,000 or to imprisonment, or had been convicted of an offence involving fraud

or dishonesty, or is an undischarged bankrupt. Section 6(1)(f) further provides that the

controller will not grant a license to an applicant if any of the applicant s directors or manager

had been a director or manager of a licensed housing developer which had been wound up by

a court.

The requirement prescribed in s 6(1)(f) should, among others, reduce the risk of granting alicense to an applicant who is managed by one or more persons with a bad track record in the


















housing development industry. Another method used to minimize such risk is found in s 7(f)

of the Housing Development Act 1966. It provides that a developer is to inform the controller

on the progress of the housing project on a semi-annual basis. The progress reports are to be

submitted to the controller by the 21st day of January and July respectively. Despite all these

measures and close monitoring, there were 261 abandoned housing projects in West Malaysia

for the period commencing from the year 1990 to December 2005.

Rights of the purchaser

In this section, the writers will discuss the rights of the purchaser of a new residential property

to claim for liquidated damages and to terminate the contract of sale. Regulation 11(1) of the

Housing Development Regulations 1989 requires a contract of sale for the sale and purchase

of a landed residential property to be in the form prescribed in Schedule G. If the subject

residential property is a housing accommodation in a subdivided building, the contract is to be

in the form prescribed in Schedule H. It is important to note the following. [*22]

First, when the Minister of Housing and Local Government amended the Housing Developers

(Control and Licensing) Regulations 1989 in 2002, the provisions in both Schedules G and H

were also amended. There is an abundance of decided cases pertaining to the predecessors of

the current Schedules G and H, but few decided cases on the current Schedules G and H.

Caution must be exercised when perusing the former and applying the principles enunciated

in the said cases to the current standard contract of sale. As was held by the Court of Appeal

in Syarikat Kemajuan Perumahan Negara Sdn Bhd v Lee Cheng & Anor 7:

Whatever principles and propositions enunciated in these cases must be considered in the

light of those rules and regulations that were applicable. They cannot be of universal guide for

all cases associated with late delivery of vacant possession of houses classified under the

Housing Developers (Control and Licensing) Act 1966 except when the appropriate rules and

regulations so applied are similar. Thus, one must be cautious when relying on such

authorities to support or argue against the scope and extent of ... the said Act. Here, what

sauce is good for the goose is not necessarily good for the gander. The respective rules or

regulations used in each case must be fully appreciated.

Secondly, the developer and the purchaser cannot contract out of the Housing Development

Regulations 1989 unless the controller has approved it. If they were to do so, the term which

is contrary to the prescribed form and which infringes the rights conferred on the purchaser by

the Housing Development Act 1966 and its subsidiary legislation, is illegal and against thepublic policy 8. Notwithstanding that, the sale is not invalidated and the developer cannot

avoid the sale 9.

Thirdly, the provisions in Schedules G and H are mutatis mutandis. In this paper, the writers

will, unless otherwise stipulated, refer only to the provisions in the form prescribed in

Schedule G. [*23]

Right to claim for liquidated damages

Where the new residential property is a landed property, the developer is to deliver vacant












possession of the property to the purchaser within 24 months from the date of the contract of

sale 10. Where the new residential property is a housing accommodation in a subdivided

building, the developer is to deliver vacant possession of the property within 36 months from

the date of the contract 11. Where the purchaser had paid the deposit or booking fee prior to

the execution of the sale and purchase agreement, time commences from the date of the

payment. This was held by the Supreme Court in Faber Union Sdn Bhd v Chew Ngat Shong 12

and was followed by the High Court in Lim Eh Fa & Ors v Seri Maju Padu 13.

In Lim Eh Fa, Suriyadi J held that the contract was made on the date the deposit was paid, for

on that very date, there was an offer and acceptance. The purchaser was obliged to pay the full

purchase price and the developer assumed responsibility to fulfill its part of the bargain to

build, deliver and handover vacant possession of the property within the stipulated time. If the

date of the signing of the sale and purchase agreement were to be taken as the relevant date

when the time started to run for the delivery of vacant possession, the developer could delay

signing the agreement. This would prejudice the purchaser s interests. The learned judge

explained that r 11(2) of the Housing Developers Regulations 1989 which read, no housing

developer should collect any payment by whatever name called except as prescribed by thecontract of sale meant that the developer was permitted to accept deposits so long as it was

provided for under the sale and purchase agreement. This provision was retained when the

1989 Regulations was amended in 2002.

Thus, the developer is to deliver vacant possession of the property within 24 months from the

date of the sale and purchase agreement or the date of payment of the deposit, whichever is

the earlier. The manner for the delivery of vacant possession of the property is prescribed in cl

24 of Schedule G 14. The provision reads as follows:

Upon the issuance of a certificate by the vendor s architect certifying that the construction

of the said building has been duly completed and water and electricity supply are ready for

connection to the said building and the vendor has applied for the issuance of the Certificate

of Fitness for Occupation from the appropriate authority in compliance with the relevant

provisions of the [*24Uniform] Building By-Laws 1984 and the purchaser having paid all

monies payable under sub-cl 4(1) in accordance with the Third Schedule and all other monies

due under this agreement and the purchaser having performed and observed all the terms and

covenants on his part under this agreement the vendor shall let the purchaser into possession

of the said property.

The delivery of vacant possession by the vendor shall be supported by:

a certificate signed by the vendor s architect certifying that the said building has been duly

constructed and completed in accordance with all relevant acts, by-laws and regulations and

that all conditions imposed by the appropriate authority in respect of the issuance of theCertificate of Fitness for Occupation have been duly complied with; and

a letter of confirmation from the appropriate authority certifying that the Form E as

prescribed under the Second Schedule to the Uniform Building By-Laws 1984 has been duly

submitted by the vendor and checked and accepted by the appropriate authority.

Such possession shall not give the purchaser the right to occupy and the purchaser shall

not occupy the said property until such time as the Certificate of Fitness for Occupation for

the said building is issued.

Upon the expiry of fourteen (14) days from the date of a notice from the vendor

requesting the purchaser to take possession of the said property, whether or not the purchaser

has actually entered into possession or occupation of the said property, the purchaser shall be

deemed to have taken delivery of vacant possession.


















The developer is to request the purchaser to take possession of the property. The request must

be accompanied by first, a certificate of the developer s architect that the property has been

completed in accordance with the relevant laws, and that all conditions imposed by the

authority in respect of the issuance of the Certificate of Fitness for Occupation ( the CFO )

have been complied with; and secondly, a certificate from the authority that the developer has

submitted an application for the issuance of the CFO of the residential property and theapplication has been duly checked and accepted by the authority. Upon receipt of the notice,

the purchaser has 14 days to take delivery. If the purchaser fails to do so, sub-cl (4) provides

that he is deemed to have taken delivery of vacant possession.

Clause 23(2) of Schedule G requires the developer to deliver vacant possession within the

time stipulated, failing which the purchaser has a right to claim from the developer liquidated

damages calculated on a daily basis at the rate of 10% of the purchase price from the expiry of

the scheduled date of delivery of vacant possession until the actual date the purchaser takes

delivery of vacant possession. The purchaser is not required to prove his actual damage or

loss pursuant to s 75 of the Contracts Act 1950 (Act 136, Rev 1974), for cl 23(2) on liquidated

damages is mandatory in nature 15. It will [*25be] shown below that this method for thecomputation of damages as prescribed in this clause has a bearing on the rights of the

purchaser.

To have a better understanding on the method for the computation of the agreed liquidated

damages as prescribed in cl 23(2) of Schedule G, the writers will first, discuss the formula

found in the predecessors of the Housing Development Regulations 1989, namely, r 12(1)(r)

of the Housing Developers (Control and Licensing) Rules 1970, cl 18(2) of Schedule E to the

Housing Developers (Control and Licensing) Regulations 1982, and cl 20(2) of Schedules G

and H respectively of the Housing Developer (Control and Licensing) Regulations 1989. They

were in pari materia.

For ease of reference, the writers will refer to cl 18(2) of Schedule E to the Housing

Developers (Control and Licensing) Regulations 1982. This clause was the subject of

contention in Insun Development Sdn Bhd v Azali bin Bakar 16. It read:

If the vendor fails to deliver vacant possession of the said building in time, the vendor

shall pay to the purchaser liquidated damages to be calculated from day to day at the rate of

10% per annum of the purchase price.

In Insun Development , the scheduled date for the delivery of vacant possession was 12

December 1986, but the property was completed and available for delivery only on 25 March

1994. There was a delay of more than six years. The purchaser filed his claim against thedeveloper on 31 July 1993. The issue before the court was whether the purchaser was out of

time. It would be if the purchaser s cause of action against the developer for liquidated

damages arose the day after the expiry of the date scheduled for the delivery of vacant

possession.

The Federal Court held that in the absence of any express contractual provisions, the

purchaser s right to sue for damages accrued on the date of the breach of contract. Since the

breach occurred the day after the time limited in the contract of sale for the delivery of vacant

possession, the purchaser was out of time. The limitation period had expired.

The Federal Court in Insun Development Sdn Bhd distinguished the facts in the case fromthose in Loh Wai Lian v SEA Housing Corporation Sdn Bhd 17. In Loh Wai Lian, the parties to












the contract modified the purchaser s rights in the event of a breach of the contract in such a

manner as to postpone the date of accrual of the purchaser s right to sue for damages. The

contract of sale in Loh Wai Lian provided a formula for the computation of the agreed

liquidated damages which defined its opening and closing dates. The formula read:

If the said building is not completed and ready for delivery of possession to the purchaser

within the aforesaid period, the vendor shall pay to the purchaser agreed [*26liquidat]damages calculated from day to day at the rate of 8% per annum on the purchase price of the

said property from such aforesaid date to the date of actual completion and delivery of vacant

possession of the said property to the purchaser.

The closing date was the date of the actual completion and delivery of vacant possession of

the property to the purchaser. If there was any delay, the purchaser s cause of action for

liquidated damages accrued then.

Unlike the contract of sale in Loh Wai Lian, the contract of sale in Insun Development did not

provide for any closing date in its formula for the computation of liquidated damages. The

formula in Insun Development was the formula found in all standard contracts of sale of newresidential properties prior to the amendment of the Housing Developer (Control and

Licensing) Regulations 1989 in the year 2002.

Thus, where the contract of sale of a new residential property was made prior to 1 December

2002 and there was a delay in the delivery of vacant possession of the property to the

purchaser, the purchaser s cause of action for liquidated damages accrued on the expiry of the

time scheduled in the contract for the delivery of vacant possession. Pursuant to s 6 of the

Limitation Act 1953 (Act 254, Rev 1981), the purchaser had to commence action for the

damages within six years from the date. He should not wait for the vacant possession of the

property to be delivered to him before he commenced action, for the limitation period might

have expired by then. If the purchaser failed to file his action within six years from the

scheduled date for the delivery of vacant possession, he might be left without any legal

remedy.

However, the current scenario under the Housing Development Regulations 1989 is different.

All contracts of sale of new residential properties made on or after 1 December 2002 adopt

the formula prescribed in the contract of sale in Loh Wai Lian for liquidated damages for late

delivery of vacant possession. The current cl 23(2) of Schedule G 18 prescribes the date the

purchaser takes vacant possession of the property as the closing date for the computation of

the liquidated damages. Clause 23(2) reads:

If the vendor fails to deliver vacant possession of the said building in the mannerstipulates in cl 24 herein within the time stipulated in sub-cl (1), the vendor shall be liable to

pay to the purchaser liquidated damages calculated from day to day at the rate of ten per

centum (10%) per annum of the purchase price from the expiry date of the delivery of vacant

possession in sub-cl (1) until the date the purchaser takes vacant possession of the said

building. Such liquidated damages shall be paid by the vendor to the purchaser immediately

upon the date the purchaser takes vacant possession of the said building.

Further, cl 23(2) clearly provides that the developer is liable to pay the liquidated damages to

the purchaser only upon delivery of the vacant possession [*27to] the purchaser. Prior

thereto, the developer is not liable. Thus, if there is a delay in the delivery of vacant

possession, the purchaser s cause of action against the developer for liquidated damages arisesonly on the date the purchaser takes or is deemed to have taken vacant possession of the said






residential property 19. If the purchaser wishes to file an action against the developer in court,

he has to do so within six years from that date 20. This is further reinforced by cl 23(3) of the

Schedule G 21, which reads:

For the avoidance of doubt, any cause of action to claim liquidated damages by the

purchaser under this clause shall accrue on the date the purchaser takes vacant possession of

the said building.

It is submitted that cl 23(2) and (3) of Schedule G presuppose that all new residential

properties will be completed. They do not contemplate the abandonment of any housing

project. If the developer abandons the project, the purchaser cannot claim for liquidated

damages, for vacant possession of the property has yet to be delivered to him. Thus, a

developer may avoid paying liquidated damages for late delivery to the purchaser by not

completing the property at all or by not delivering vacant possession to the purchaser. It is to

be stressed that the purchaser s cause of action against the developer will be triggered only

after the developer has requested the purchaser to take possession of the property. In view

thereof, it is of utmost importance to study whether the purchaser has any other remedy

against the developer. In the following section, the writers will discuss whether the purchaserof a new residential property in an abandoned project may terminate the contract of sale for

the sale and purchase of the property.

Right to terminate the sale and purchase agreement

Clause 10 of Schedule G to the Housing Development Regulations 1989 22 provides that the

developer has the discretion to terminate the contract of sale if the purchaser, inter alia, fails

to pay any of the installments within 28 days from its due date or commits any breach of or

fails to perform or observe any material terms or conditions or covenants contained in the

contract. A pertinent issue is whether the purchaser of a new residential property is given a

similar discretion whether to terminate the contract of sale and claim the refund of all moneys

paid thus far in the event the developer fails to fulfill its obligations under the contract.

A provision which gives the purchaser the right to terminate the contract of sale is s 8A of the

Housing Development Act 1966. It provides for the [*28mutual] termination of the contract

by both purchaser and developer if the development of the phrase or project has not

commenced six months after the execution of the contract provided that the following two

conditions are fulfilled. The first condition is that at least 75% of all the purchasers who have

entered into contracts of sale to buy residential properties in the phase or project have agreedin writing with the housing developer to terminate the contracts. The second condition is that

the termination has been approved by the minister. Upon the termination of the contracts of

sale, the developer shall refund all moneys received from the respective purchasers free of any

interest. Unfortunately, s 8A applies only where the developer has not commenced the

project. Section 8A does not apply where the developer abandons the project after it has

started work on it.

Apart from s 8A, there is no other express provision in the Act or its subsidiary legislation

which gives a statutory right to the purchaser to terminate the contract of sale and claim for

the full refund 23. The writers are not aware of any decided case pertaining to the rights of the

purchaser to terminate the contract which is in the form currently prescribed in Schedule G tothe Housing Development Regulations 1989. But, there are numerous cases pertaining to his


















position under the previous standard contract of sale and the authorities are consistent. The

courts held that the purchaser was entitled to terminate the contract and claim for the full

refund of all monies paid by the purchaser to the developer 24. The writers will discuss two of

the cases, namely, Tan Yang Long & Anor v Newacres Sdn Bhd 25 and Thomas a/l Iruthayam

& Anor v LSSC Development Sdn Bhd 26.

In Tan Yang Long, the purchaser entered into a contract of sale on 18 March 1985. The

contract was subjected to the Housing Development Act 1966 and vacant possession of the

apartment was to be delivered by 17 March 1988. Time was the essence of the contract. The

vacant possession was not delivered on the scheduled date, and the purchaser sent a letter on

the first day of each month from October 1988 to February 1989 demanding compensation for

late delivery as provided in the contract of sale. The developer ignored the letters and on 3

February 1989, the purchaser s solicitors sent a letter to the [*29develope] to terminate the

contract of sale and to demand the refund of all monies paid. The court held that the purchaser

could do so. Shanker J held 27:

By February 1989 there was a delay of nearly a year. I regard the total failure of (the

developer) to give any credible assurance as to if and when the project would be completed toamount to a renunciation or abandonment of the agreement. Their conduct amounted to a

fundamental breach of contract.

In Thomas a/l Iruthayam & Anor v LSSC Development Sdn Bhd 28, the purchaser entered into

a contract of sale for the sale and purchase of a residential property on 19 June 1996. Vacant

possession together with the CFO and with water and electricity supply connected to the

property was to be delivered to the purchaser within 24 months. In the event of delay, the

developer was to pay immediately to the purchaser liquidated damages calculated from day to

day at the rate of 10% per annum of the purchase price. Clause 12(b) further provided that:

In the event of a failure and/or default by the vendor(s) to complete the sale of the said

property and to deliver vacant possession of the same to the purchaser(s) in accordance with

the terms herein, the purchaser(s) shall, without prejudice to the other provisions of this

agreement or any other rights and remedies as may be available to the purchaser(s) at law or

on equity, be entitled to take such action as may be available to the purchaser(s) at law for

specific performance of the terms and conditions herein and the vendor(s) shall reimburse all

cost and expenses incurred by the purchaser(s) (including but without limitation the

purchaser(s) solicitors" cost on a solicitor-client basis).

When the developer failed to deliver vacant possession of the property, the purchaser through

his solicitors sent a letter of termination of the contract of sale to the defendant. The High

Court held that the developer had breached the contract and cl 12(b) of the contract of saleallowed the purchaser to terminate the contract. The purchaser exercised his rights under cl

12(b) when his solicitor delivered the letter of termination to the developer. The court ordered

the developer to refund the purchase price received together with interest at the rate of 8%

from the date of the originating summons. The court further opined that even if the contract of

sale did not provide for termination, s 56(1) of the Contracts Act 1950 allowed the purchaser

to do so. The purchaser had an option whether to carry on or avoid the contract when the

developer failed to deliver vacant possession within the time stipulated in the contract.

Section 56(1) of the Contracts Act 1950 reads 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 [*30or] before

the specified time, the contract, or so much of it as has not been performed, becomes voidableat the option of the promisee, if the intention of the parties was that time should be of the


















essence of the contract.

Section 56(1) of the Contracts Act 1950 applies where time is of the essence of the contract.

In Thomas a/l Iruthayam, time was of the essence of the contract. Thus, according to Suriyadi

J, even if the contract of sale did not specifically give the purchaser a right to terminate the

contract, the purchaser has an option whether to carry on or avoid the contract when thedeveloper failed to deliver vacant possession within the time stipulated in the contract. Thus,

the purchaser could also sue to terminate the contract under s 34 of the Specific Relief Act

1950 (Act 137, Rev 1974).

It is submitted that the principles enunciated by the courts in Tan Yang Long & Anor v

Newacres Sdn Bhd and Thomas a/l Iruthayam v LSSC Development Sdn Bhd are still

applicable to the standard contracts of sale of new residential properties in the form currently

prescribed in Schedule G. The writers reasons are as follows. First, the general principles in

the law of contracts should apply if they are not contrary to the purpose and spirit of the

Housing Development Act 1966. Secondly, since the Housing Development Act 1966 was

enacted to protect the purchaser, the purchaser should continue to enjoy the rights conferredon him by other legislations. In City Investment Sdn Bhd v Koperasi Cuepacs Tanggungan

Bhd 29, the Privy Council held that the Housing Development Act 1966 and the Housing

Developers (Control and Licensing) Regulations 1970 were designed to improve and

supplement common law remedies and do not expressly or by implication deprive a litigant of

a contractual remedy which is not dealt with under the rules . As was held by the High Court

in Chye Fook and Anor v Teh Teng Seng Realty Sdn Bhd 30, the purchaser should not be

deprived of his rights under the Contracts Act 1950. If the legislature intended otherwise, the

legislature would have clearly provided so in the Housing Development Act 1966. The court

in Chye Fook also held that the purchaser s entitlement to liquidated damages if the developer

failed to complete within 24 months did not in any way take away the rights of the purchaser

to rescind the contract .

However, it must be stressed that the purchaser must exercise his option to terminate the

contract of sale within a reasonable time, particularly where the developer has not abandoned

the project, but instead has continued with the construction work after the expiry of the

scheduled time for delivery of vacant possession. In Cheah Khoon Tee v Crimson

Development Sdn Bhd 31, the developer failed to deliver vacant possession of the property

within the time stipulated in the contract of sale. After 18 months of delay, the purchaser filed

[*31an] application to terminate the contract of sale pursuant to s 56 of the Contracts Act

1950. Steve Shim J held as follows 32:

The passive conduct or silence and inactivity on the part of (the purchaser) for a period of 18 months or thereabout, must, in the absence of any cogent explanation, be regarded as

unreasonably long, suggesting, quite conceivably, that (the developer) could continue with the

construction work on (the residential property) indefinitely upon the expiry of the completion

date or encouraging (the developer) to think that it would be given time indefinitely and not to

be cut off without further notice. Such further notice appears to relate to giving a fresh limit

with a proviso that failure to comply therewith would result or deem to result in the contract

being cancelled ...

... In the instant case, no notice of any fresh limit had been given by (the purchaser) to (the

developer). There is sufficient evidence that (the developer) had continued with the

construction work ... well after the expiry of the completion date.

In the circumstances, I am of the view that (the purchaser has) waived (his) rights to relyon time being of the essence of the agreement and are therefore estopped from terminating or















rescinding the said agreements. This would effectively mean that (the purchaser s) remedy ...

is to sue (the developer) for liquidated damages.

The next issue is whether the purchaser has any right to claim damages upon the termination

of the contract of sale. Following the Privy Council s decision in Muradlihar Chatterjee v

International Film Co Ltd 33

, an innocent party who exercises his right to terminate thecontract under either s 40 or s 56(1) of the Contracts Act 1950 may avail himself to the

remedy prescribed in s 76 of the Act. The Federal Court in Apex Pharmacy v Chee Chin 34

held that s 76 applies when a person avoids the contract under s 56(1). Section 76 of the

Contracts Act 1950 reads, a person who rightly rescinds a contract is entitled to compensation

for any damage which he has sustained through the non-fulfilment of the contract .

In Chye Fook & Anor v Teh Teng Seng Realty Sdn Bhd 35, the court held that following s 76 of

the Contracts Act 1950, the purchaser who avoids the contract, is entitled to compensation for

any damage which he has sustained through the non-fulfillment of the contract. This includes

the right to the refund of all moneys which he has paid under the agreement and all other

damages which is calculated following the formula laid down in s 74 of the Act. Thepurchaser can claim compensation for any loss or damage caused to him which naturally

arose in the usual course of things from the breach of the contract, or which the parties knew,

when they made the contract, to be likely to result from the breach of it. [*32]

Another important issue is whether the purchaser who has rightfully terminated the contract of

sale may claim for the liquidated damages pursuant to cl 23(2) of Schedule G 36 in lieu of the

damages calculated pursuant to s 74 of the Contracts Act 1950. The High Court in Kang Yoon

Mook Xavier v Insun Development Sdn Bhd 37 held that the purchaser could do so. However, it

is submitted that this cannot be generalized. In Kang Yoon Mook Xavier , the contract of sale

was in the form prescribed in Schedule E to the Housing Developers (Control and Licensing)

Regulations 1982. The prescribed formula for liquidated damages did not provide a closing

date and thus, the purchaser could sue for the liquidated damages immediately upon the

expiry of the scheduled date for the delivery of vacant possession. He did not need to wait for

the delivery of the vacant possession of the property to him.

As discussed above, the formula for liquidated damages which is currently prescribed in

Schedule G to the Housing Development Regulations 1989 clearly provides that a purchaser

cannot proceed against the developer for the liquidated damages before he takes vacant

possession of the property 38. The provision in cl 23(3) is found in all contracts of sale of new

residential properties which are made on or after 1 December 2002. Thus, if the contract of

sale between the purchaser and developer is made on or after that date and the contract isterminated at the option of the purchaser under s 76 of the Contracts Act 1950, the purchaser

cannot claim for liquidated damages pursuant to cl 23(2) of Schedule G 39. He has to prove his

loss under s 74 of the Contracts Act 1950. However, if the contract was made before 1

December 2002, the purchaser could claim for the liquidated damages stipulated in the

contract of sale instead of damages calculated pursuant to the formula prescribed in s 74 of

the Contracts Act 1950.

Where the purchaser has charged the property or assigned his rights

In most cases, the purchaser of a new residential property takes a loan to finance his purchase.
























As security, the purchaser creates a charge over the property where a separate document of

title to the property has been issued. Where there is no separate document of title to the

residential property, the purchaser assigns his rights under the contract of sale to his financier

pending the issuance of the separate title to the property and the creation of a charge in favour

of the financier. [*33]

In this section, the writers will first, discuss whether the purchaser who has created a charge

or an assignment in favour of the financier may instruct the financier to stop remitting the

progress payments to the developer; and secondly, examine whether the said purchaser has

any right to institute action against the developer.

(a) Right to stop payment?

Before the developer transfers the property to the purchaser to enable the purchaser to create a

charge in favour of his financier, the developer will require the financier to give anundertaking to remit the loan sum progressively to the developer in accordance with the

contract of sale. Likewise, where there is no separate document of title to the property, the

developer will require the financier to give a similar undertaking in consideration of the

developer giving its consent to the assignment.

A pertinent issue is whether the purchaser may restrain his financier from fulfilling its

obligations under its undertaking to the developer, that is, to restrain the financier from

releasing the loan progressively to the developer. This issue is critical where there is a delay

in the completion of the property and the anticipated liquidated damages exceed the balance

of the purchase price for the property.

This was the scenario in Hoo See Sen v Public Bank Bhd & Anor 40 and the Supreme Court

granted an injunction against the financier to restrain it from paying the developer. The

injunction was granted despite the fact that the financier would commit a breach of its

undertaking to the developer. According to Salleh Abas LP, there was no provision in the

contract between the purchaser and his financier which either authorized or imposed an

obligation on the financier to give an undertaking to the developer to pay any moneys due

from the purchaser to the developer. Instead, it was expressly provided in the contract that the

financier s authority to disburse the loan to the developer was for the benefit of the purchaser.

The payment of the balance of the purchase price to the developer when the developer was

under an immediate obligation to pay a bigger sum of moneys to the purchaser could not inany circumstances be for the benefit of the purchaser.

Further, the purchaser had assigned only his rights regarding the property and under the

contract of sale to the financier. The purchaser s duties and liabilities under the contract of

sale, which included the payment of the balance of the purchase price, remained with the

purchaser. Thus, under no circumstances was the financier bound or even authorized to make

such payment. In fact, the financier was an agent of the purchaser in the matter of disbursing

the loan. The financier held the loan sum on behalf of the [*34purchase] and was bound to

release the money only when authorized to do so, and it must be for the benefit of the

purchaser.

However, it is submitted that the principle in Hoo See Sen may no longer applies for the






following reasons. First, in Hoo See Sen, the Supreme Court held that the release of the

moneys could not benefit the purchaser for the developer was under an immediate obligation

to pay a bigger sum of moneys to purchaser. This will not be the position under the current

standard contract of sale unless the developer has delivered vacant possession of the property

to the purchaser. As discussed above, cl 23 of the present Schedule G provides that the

developer is obliged to pay the liquidated damages only after the delivery of vacantpossession of the property to the purchaser. On the other hand, the purchaser is obliged under

cll 4 and 9 to pay the purchase price progressively upon receipt of the notice that a particular

stage of works has been completed. Even though there is a delay in the completion of the

property and vacant possession has not been given to the purchaser, the purchaser has to pay

the progressive payments within 21 days of notice. If he fails to do so, an interest of 10% will

be levied on the unpaid installment.

Secondly, the Supreme Court in Hoo See Sen held that the financier was the purchaser s agent

in the matter of disbursing the loan. Thus, a financier could use the principles of agency to

protect itself. Since s 183 of the Contracts Act 1950 provides that an agent is not personally

bound by a contract with a third party where the agent made the contract on behalf of hisprincipal, the financier should expressly state in its undertaking to the developer that the

undertaking is given on behalf of the purchaser. Then, the developer cannot sue the financier

on the undertaking which the financier issued on behalf of the purchaser.

Further, to avoid the effect of the decision in Hoo See Sen that the financier was not

authorized to give an undertaking to the developer, a financier may require the purchaser to

expressly authorize the financier to give the required undertaking to the developer. This

method of protection will also comply with the principle in Perdana Merchants Bankers v

Abdul Rahim bin Abdul Hamid 41. In Perdana Merchants Bankers, the High Court held that

even though a financier owes a fiduciary duty to its borrower and is duty bound to execute its

duties and responsibilities with reasonable care and skill based on the principle of constructive

trustee, the principle of constructive trustee is not absolute. The principle is limited by the

terms of the agreement between the financier and the borrower. If there are clear terms

regarding an issue, the terms should be enforced. If the financier has acted within the terms,

then the question of the financier s failure to discharge its duty as a constructive trustee does

not arise. [*35]

In conclusion, if the purchaser wishes to restrain the financier from fulfilling its undertaking

to the developer, the purchaser will have to obtain an injunction against the financier. This is

due to the change in the method on the computation of liquidated damages and the methods

which the financier may use to circumvent the effect of Hoo See Sen v Public Bank Bhd & Anor .

(b) Right to institute action against the developer?

Prior to the amendment to the Housing Developers (Control and Licensing) Regulations 1989

in the year 2002, an important issue was whether such an assignment in favour of the

financier was an assignment under s 4(3) of the Civil Law Act 1956 (Act 67, Rev 1972). If it

was, then the right to sue the developer on the contract of sale was vested with the financier.

The purchaser had no right to sue the developer on the contract of sale. However, if theassignment took effect in equity, the right to sue the developer remained with the purchaser.






Thus, whether the purchaser had a right to sue the developer on the contract depended on

whether he had created an assignment under s 4(3) of the Civil Law Act 1956. And whether

an assignment under s 4(3) of the Civil Law Act 1956 had been created depended on the terms

of the instrument creating the assignment. As Seah FJ said in Nouvau Mont Dor (M) Sdn Bhd

v Faber Development Sdn Bhd 42:

It is plain that in every case of this kind, all the terms of the instrument must beconsidered; and whatever may be the phraseology adopted in some particular part of it, if, on

consideration of the whole instrument, it is clear that the intention was to give a charge only,

then the action must be in the name of the assignor. While, on the other hand, if it is clear

from the instrument as a whole that the intention was to pass all the rights of the assignor in

the debt or chose in action to the assignee, then the case will come within (s 4(3) of the Civil

Law Act 1956) and the action must be brought in the name of the assignee.

Unfortunately, the status of an assignment created in favour of the financier as security for the

loan granted to the purchaser was uncertain. There were conflicting decisions on whether the

assignment was an assignment under s 4(3) of the Civil Law Act 1956 or an assignment in

equity even where the assignment clauses were similarly worded 43. In Nouvau Mont Dor (M)Sdn Bhd v Faber Development Sdn Bhd , the Federal Court held that the assignment was an

assignment under s 4(3) of the Civil Law Act 1956. But, the Federal Court s decision was not

followed by the Court of Appeal in Philleo Allied Bank (Malaysia) Bhd v Bupinder Singh a/l

Avtar Singh & Anor 44 despite the doctrine of stare decisis. [*36]

To overcome this unhappy state of events, a new provision was included in Schedule G when

the Housing Developers (Control and Licensing) Regulations 1989 was amended in 2002. The

new cl 7 of Schedule G 45 reads:

The purchaser shall be entitled on his own volition in his own name to initiate, commence,

institute and maintain in any court or tribunal any action, suit or proceeding against the

vendor or any other person in respect of any matter arising out of this agreement unless a

contrary intention is expressed in any agreement, assignment or charge between the purchaser

and the financier in which case the prior written consent of the financier must first be

obtained.

Clause 7 provides that the purchaser may institute an action against the developer in respect of

a matter arising out of the contract of sale unless a contrary intention is expressed in any

agreement, assignment or charge between the purchaser and the financier. If there is a

contrary intention expressed in the document, the purchaser must obtain the prior written

consent of the financier before he institutes an action against the developer. Thus, whether the

purchaser may proceed against the developer where he has assigned or charged the propertyto his financier depends on the terms of his contract with his financier.

It is submitted that inevitably, a financier will require the purchaser to obtain its prior written

consent. This is to protect the financier s interest as a lender. If the purchaser has defaulted on

his loan, the financier may require the liquidated damages for late delivery or any refund of

the purchase price be used to settle wholly or in part the loan given to the purchaser. Further,

if the purchaser is given an absolute right to initiate action against the developer, he may

exercise his right to the detriment of the financier. The purchaser may terminate the contract

of sale in the event of a breach by the developer 46, and thus wipe out the security for the loan.


















Avenues available to the purchaser

In this section, the writers will discuss the avenues available to the purchaser who wishes to

initiate an action against the developer. The avenues are first, the Housing Legal Clinic;

secondly, the Tribunal for Homebuyer Claims; and thirdly, the courts.

The Housing Legal Clinic

The Housing Legal Clinic was established with the objective to provide advice and help solve

the problems faced by purchasers, particularly those who cannot afford legal advice or

counsel, against housing developers. The function of [*37the] Housing Legal Clinic is to

give views, advice and ways of resolving the dispute between the purchaser and developer. If

both parties do not agree with the Housing Legal Clinic s views, they may settle their dispute

through the Tribunal for Homebuyer Claims or the court 47. The respective jurisdictions of the

Tribunal and the court are discussed below.

The Tribunal for Homebuyer Claims

One of the effects of the amendments to the Housing Development Act 1966 in 2002 was the

establishment of the Tribunal for Homebuyer Claims pursuant to s 16B of the Act.

(a) Jurisdiction

The Tribunal for Homebuyer Claims may hear a claim from a person who has purchased a

residential property directly from the developer as well as the person who has purchased a

residential property from the original purchaser 48.

The first condition is found in s 16N(2) of the Housing Development Act 1966. It provides

that the jurisdiction of the Tribunal is limited to a claim that is based on a cause of action

arising from the contract of sale between the claimant and the developer. According to the

Federal Court in Westcourt Corp Sdn Bhd v Tribunal Tuntutan Pembeli Rumah 49, it is

immaterial that the contract of sale was made before the tribunal was established on 1December 2002. However, it is of utmost importance that there must exist a contract between

the claimant and the developer. This leads to the issue whether a subsequent purchaser from

the original purchaser, has locus standi to lodge his claim against the developer with the

tribunal. It appears that he does not unless he has entered into a contract of sale with the

developer. It appears to be insufficient that he has entered into an agreement with the original

purchaser to purchase the said property.

The second condition is also found in s 16N(2) of the Housing Development Act 1966. The

claim must be filed not later than 12 months from the date of the issuance of the CFO of the

property or the expiry date of the defect liability period as set out in the contract of sale. It is

submitted that the provision is ambiguous. It is uncertain whether the limitation period for aclaim on liquidated damages is 12 months from the date of the issuance of the CFO, and the












limitation period for the non-rectification of any defect is 12 months from the expiry date of

the defect liability period. This is because [*38the] limitation period as prescribed in s

16N(2) could also be interpreted to mean that the limitation period for any claim against the

developer is 12 months from the date of the issuance of the CFO or the expiry of the defect

liability period, whichever is the later.

The third condition is that the claim does not exceed RM25,000 50 unless both developer and

purchaser have agreed that the matter be heard by the tribunal 51. However, if the claim

exceeds RM25,000 and the developer does not agree to have the matter heard by the tribunal,

the purchaser may still lodge his claim with the tribunal. Upon the lodgment of the claim, he

is deemed to have abandoned his claim for the sum in excess of RM25,000 and has

discharged the developer of the amount so abandoned 52.

(b) Salient features

The purpose of the establishment of the Tribunal for Homebuyer Claims is to simplify the

settlement of claims made by a purchaser against the developer. It is to benefit many

purchasers because it provides for an easier and cheaper means of dispute resolution 53. The

writers will discuss some of the salient features of the tribunal.

Section 16N of the Housing Development Act 1966 provides that the tribunal shall assist the

purchaser and the developer to negotiate a settlement if the circumstances are appropriate.

Further, since most of the issues raised are not complex issues of law, both developer and

purchaser shall not be represented by an advocate and solicitor. The only exceptions are

where in the opinion of the tribunal, the matter in question involves complex issues of law and

one party will suffer severe financial hardship if he is not represented by an advocate and

solicitor 54. However, if one party is allowed to be represented by an advocate and solicitor,

then the other party shall also be so entitled. This is to ensure that neither party to the

proceedings would be substantially disadvantaged. With regard to the procedure, s 16AE

provides that subject to the provisions in the Housing Development Act 1966 and any

regulations made under the Act, the tribunal shall adopt such procedure as it thinks fit and

proper. This is further reinforced by s 16AE of the Act which provides that the proceedings of

the tribunal or award or other document of the tribunal shall not be set aside or quashed for

want of form. However, it must be noted that the Minister of Housing and Local Government

has made regulations pertaining to the procedure of the tribunal, the forms to be used, and the

fees payable. They are found in the Housing Development (Tribunal [*39for] HomebuyersClaims) Regulations 2002 which also came into effect on 1 December 2002.

Section 16Y of the Housing Development Act 1966 further requires the Tribunal for

Homebuyer Claims to make its award without delay and, where practicable, within sixty days

from the first day of the hearing. Such award shall be deemed to be an order of a magistrate s

court and can be enforced accordingly 55. Thus, if the developer fails to comply with the

award, the purchaser may execute the award by applying to the magistrate s court in which the

award was recorded, for a writ of seizure and sale or execution against the developer. The

purchaser can also petition to wind up the developer.

Section 16AD further protects the purchaser by providing that any person who fails to complywith an award made by the Tribunal within the period specified in the award commits an





















offence and shall on conviction be liable to a fine not exceeding RM5,000 or to imprisonment

for a term not exceeding two years or to both. If the offence is a continuing offence, the

offender shall also be imposed with a fine not exceeding RM1,000 for each day or part of a

day during which the offence continues after conviction.

The court

If the purchaser s claim is outside the jurisdiction of the Tribunal for Homebuyer Claims, he

may file his claim in a court. If the amount of his claim does not exceed RM250,000, he is to

file his claim with the Sessions Court. He must comply with the court procedure prescribed in

the Rules of the Subordinate Courts 1980 (PU(A) 328/80). If the purchaser is claiming for an

amount exceeding RM250,000 or for specific performance, the purchaser is to file his claim

with the High Court. He must also comply with the court procedures as prescribed in the

Rules of the High Court 1980 (PU(A) 50/80).

Pursuant to s 6 of the Limitation Act 1963, the purchaser must file his claim within six years

from the date his cause of action against the developer accrues. If the cause of action pertains

to the liability of the developer for late delivery of vacant possession, the limitation period is

six years from the date he takes vacant possession of the property 56. If the cause of action

pertains to the failure of the developer to rectify the defects, the limitation period is six years

from the expiry of the time given to the developer which is 30 days from the purchaser s

notification 57. [*40]

Recommendations

In this concluding section of this paper, the writers will propose some reforms to the Housing

Development Act 1966 and its subsidiary legislation to enhance the protection of a purchaser

of a new residential property.

Extension of the Housing Development Act 1966

The Housing Development Act 1966 provides for the control and licensing of the business of housing development in West Malaysia only. It is proposed that the Act should be extended to

cover the whole of Malaysia. It is also proposed that the definition of housing accommodation

and housing development be reviewed. Currently, the development of residential units on any

land designated for or approved for commercial development is not regulated by the Act.

Further, if the number of residential units developed or to be developed is not more than four,

the development is not regulated by the Act. It is immaterial that the development is carried

out on a land designated for or approved for residential development. To protect a purchaser

of a new residential unit, it is proposed that the definition for housing accommodation be

widened to include an accommodation erected on any land designated for or approved for

commercial development. This is important in the light of the trend to build and sell service

apartments, ie housing accommodations on land designated for commercial development. It isalso proposed that the terms housing development should also be extended to include









situations where any person erect a housing accommodation with the intent to sell it at a

profit.

Defects liability period

The writers have highlighted that the delivery of vacant possession of the property to the

purchaser does not mean that the purchaser may occupy the property. This is because the

developer may deliver vacant possession without obtaining the CFO. It is sufficient for the

developer to prove that it has submitted an application for the CFO to the relevant authority.

However, cl 26(1) of Schedule G provides that the defects liability period will expire 18

months after the purchaser has taken delivery of vacant possession. As the purchaser cannot

occupy the property before the issuance of the CFO, the purchaser may not discover the

defects. Thus, it is proposed that the defects liability period should commence only upon the

issuance of the CFO.

Delivery of vacant possession

As the purchaser cannot occupy the property before the issuance of the CFO, he will continue

to suffer loss in the form of payment of rental or loss in rental income 58. The possibility of the

delay in the issuance of the CFO is recognized, [*41for] s 16N of the Housing Development

Act 1966 provides that the limitation period to file a claim with the Tribunal for Homebuyer

Claims is 12 months from the date of the issuance of the CFO of the property or the expiry

date of the defect liability period 59. As the defects liability period will expire only 18 months

after the purchaser has taken delivery of vacant possession 60, the Regulations thus recognizes

that the issuance of the CFO may be delayed for more than six months after the delivery of

vacant possession of the property to the purchaser.

Thus, it is proposed that Schedule G to the Housing Development Regulations 1989 be

amended to provide that the developer may deliver vacant possession only after the CFO has

been issued. In the event this proposal is not feasible, the Housing Development Regulations

1989 should be amended to require the developer to pay to the purchaser liquidated damages

from the scheduled date of delivery of vacant possession until its actual delivery or the

issuance of the CFO by the relevant authority, whichever is the later.

Accrual of cause of action for liquidated damages

Further, it is noted that the purchaser s cause of action to claim for liquidated damages for late

delivery accrues only on the date the purchaser takes delivery of vacant possession. It appears

that if the project is abandoned, the purchaser s cause of action will never arise. In view of

this, it is suggested that the purchaser s cause of action should accrue on the delivery of

vacant possession or the certification by the Minister for Housing and Local Government

pursuant to s 11(1)(ca) of the Housing Development Act 1966 that the developer has

abandoned the project, whichever is the earlier.












Right to terminate

It is proposed that the standard contract of sale provides that where the minister has certified

that the project has been abandoned, the purchaser has the right to terminate the contract of sale and claim for the amount paid thus far to the developer under the contract. The

unfortunate purchaser should also be entitled to claim damages for his loss arising from the

breach by the developer.

It is also proposed that the standard contract of sale provides that where the developer fails to

deliver vacant possession within the contracted time, [*42the] purchaser has the right to

terminate the contract after giving sufficient notice to the developer. Currently, the purchaser

has to rely on the rights conferred on him under the Contracts Act 1950.

Tribunal for Homebuyer Claims

The Tribunal for Homebuyer Claims was established to benefit a purchaser of a new

residential property who has a claim against the developer. However, reforms in the following

areas are desired.

(a) Limitation period

Currently, the limitation period to lodge a claim with the Tribunal for Homebuyer Claims is

12 months from the date of the issuance of the CFO of the property or the expiry date of the

defect liability period as set out in the contract of sale. As discussed above, this provision

causes some uncertainty and thus, should be clarified. Further, it is submitted that the

prescribed limitation period is too short and should be reviewed. It is noted that the limitation

period prescribed in the Limitation Act 1953 is six year from the date of the breach.

(b) Position of a subsequent purchaser

The term homebuyer was defined to mean the person who purchases a new residential

property from the developer as well as the person who purchases the property from the

original purchaser. However, s 16N(2) of the Housing Development Act 1966 provides that

only a person who has entered into a contract of sale with the developer has locus standi to

institute action against the developer at the tribunal. If that is so, the purpose of the wide

definition given to the term homebuyer , that is, to extend the jurisdiction of the tribunal to the

subsequent purchaser, is defeated. The doctrine of privity still applies to prohibit the

subsequent purchaser who has no contractual relationship with the developer from taking

action against the developer. To protect the subsequent purchaser against the developer, s

16N(2) should be reviewed and amended to allow the subsequent purchaser to sue the

developer even though he has not entered into a contract with the developer. The doctrine of privity should not apply to the subsequent purchaser.



Stricter conditions for licence

The minimum issued and paid-up capital of a licensed housing developer is only RM250,000.The developer must also have deposited at least RM250,000 with the Controller of Housing.

The writers submit that the minimum requirements should be reviewed. The minimum issued

and paid-up capital should be based on the value of the project. This is to ensure that a

developer has sufficient working capital to carry out a housing project to completion.

[*43The] minimum amount of deposit with the Controller should also be based on the value

of the project to ensure that the developer is committed to complete the project. In the event

the project is abandoned, the Controller can forfeit the deposit and use the moneys to

complete it. According to the secretary-general of the Homebuyers Association of Malaysia,

Mr Chang Kim Loong, the Government has allocated RM2 billion to revive abandoned

projects 61.

The writers also propose that where the applicant of a developer s license is a company, the

controller may require the applicant s shareholders and officers to guarantee the completion of

the project and pay the liquidated damages to the purchasers in the event of delay. This is to

overcome the doctrine of corporate personality and the doctrine of privity. Under the doctrine

of corporate personality, a company is a separate legal entity from its shareholders and

officers. Under the doctrine of privity, the purchaser may claim for liquidated damages from

only the developer. Thus, unless the corporate veil is lifted, the purchaser cannot sue the

developer s shareholders and officers. As was held by the Court of Appeal in Law Kam Loy &

Anor v Boltex Sdn Bhd & Ors 62, the court will lift the corporate veil only where special

circumstances exist indicating that the company is a mere facade concealing the true facts.

Thus, it is unlikely the court will lift the veil of incorporation of a developer to require its

shareholders or officers to pay damages to the purchasers of the project in the event there is

delay in the delivery of vacant possession.

The guarantee by the developer s shareholders and officers that they will pay the liquidated

damages to the purchasers will increase the purchasers chances of receiving due

compensation when there is a delay in the delivery of vacant possession. This is particularly

so where the project is abandoned, for it is unlikely that the developer has the funds to satisfy

any judgment awarded against it. However, the developer s shareholders and officers may

have the financial means to satisfy the awards.

Therefore, to ensure commitment on the part of the developer s shareholders and officers to

complete the project, it is proposed that the Controller should have the discretion to require

the applicant s shareholders and officers to provide a guarantee. The Controller may enforce

the guarantee on behalf of the affected purchasers. [*44]

Return to Text

n 1http:/ / www.kpkt.gov.my/kpkt/main.php?Content=sections&SectionID=149 (Accessed on

25 August 2006)





http://www.kpkt.gov.my/kpkt/main.php?Content=sections&SectionID=149








n 2As per Lord Oliver of Aylmerton in Loh Wai Lian v SEA Housing Corporation Sdn Bhd

[1987] 2 MLJ 1, at p 1.

n 3 Hariram a/l Jayaram & Ors v Sentul Raya Bhd [2003] 2 MLJ 22, and SEA Housing

Corporation Sdn Bhd v Lee Poh Choo [1982] 2 MLJ 31, at p 34.

n 4The Star , 23 June 2006, at p N4.

n 5Section 6(1)(a) and (b) of the Housing Development Act 1966. However, there is a

proposal to exempt an applicant from placing the deposit with the controller if the applicant

adopts the build-then-sell concept. It is submitted that such minimum requirement should be

raised. The minimum deposit should be based on the value of the project.

n 6Section 6(1)(a) of the Housing Development Act 1966. However, it is submitted that such

minimum requirement should be raised. The minimum paid up capital should be based on the

value of the project. Another alternative is to require the applicant to provide a performance

bond of an ascertained percentage of the value of the project.

n 7[2006] 1 MLJ 150, at p 157.

n 8See the Federal Court decisions in SEA Housing Corporation Sdn Bhd v. Lee Poh Choo

[1982] 2 MLJ 31, at p 34 where Suffian LP held that contracting out in favour of the weaker

party - ie the purchaser - might be countenanced by the courts ; and City Investment Sdn Bhd v

Koperasi Serbaguna Cuepecs Tanggungan Bhd [1985] 1 MLJ 285, at p 290. See also the

Supreme Court s decision in Rasiah Munisamy v Lim Tan & Sons Sdn Bhd [1985] 2 MLJ 291,

at pp 295-296, where Mohamed Azmi SCJ held that although the agreement did not comply

with the provisions in the Housing Developers (Control and Licensing) Regulations 1970, the

purchaser could enforce his rights under the agreement because he belonged to a class of

persons for whose protection the statutory requirement was imposed. See also SY Kok, Law

Governing the Housing Industry: A Postscript [1999] 2 MLJ cxxxi.

n 9Kang Yoon Mook Xavier v Insun Developers Sdn Bhd [1995] 2 MLJ 91.

n 10Clause 23(1) of Schedule G to the Housing Development Regulations 1989.

n 11Clause 26(1) of Schedule H to the Housing Development Regulations 1989.

n 12[1995] 2 MLJ



n 13[2002] 7 MLJ 262, at p 266.

n 14See also cl 27 of Schedule H to the Housing Development Regulations 1989.

n 15 Brisdale Resources Sdn Bhd v Law Kim[2004] 6 MLJ 76, at pp 81-82; and Sakinas Sdn

Bhd v Siew Yik Hau & Anor [2002] 5 MLJ 497, at pp 515-516.

n 16[1996] 2 MLJ 188.

n 17[1987] 2 MLJ 1.

n 18Clause 26(2) of Schedule H to the Housing Development Regulations 1989.

n 19See the above discussion on when the purchaser is deemed to have taken vacant

possession of the property.

n 20Section 6 of the Limitation Act 1953.

n 21See cl 26(3) of Schedule H to the Housing Development Regulations 1989.

n 22Clause 10 of Schedule H to the Housing Development Regulations 1989.

n 23However, it is noted that s 16Y(2)(c) of the Housing Development Act 1966 provides

that the Tribunal for Homebuyer Claims may set aside the contract of sale, wholly or in part.

n 24See Kang Yoon Mook Xavier v Insun Development Sdn Bhd [1995] 2 MLJ 91; Thomas

a/l Iruthayam and Anor v LSSC Development Sdn Bhd [2005] 4 MLJ 262; Tan Yang Long and Anor v Newacres Sdn Bhd [1992] 1 MLJ 289; Chye Fook and Anor v Teh Teng Seng Realty

Sdn Bhd [1989] 1 MLJ 308; Sim Chio Huat v Wong Fed Fui [1983] 1 MLJ 151.

n 25[1992] 1 MLJ 289.

n 26[2005] 4 MLJ 262.

n 27[1992] 1 MLJ 289, at p 295.



n 28[2005] 4 MLJ 262.

n 29[1988] 1 MLJ 69, at p 72.

n 30[1989] 1 MLJ 308, at p 310.

n 31[1999] MLJU 108.

n 32[1999] 8 CLJ 79, at pp 84-85.

n 33AIR 1943 PC 34.

n 34[1984] 2 MLJ 287.

n 35[1989] 1 MLJ 308, at p 311.

n 36Clause 26(2) of Schedule H to the Housing Development (Control and Licensing)

Regulations 1989.

n 37[1995] 2 MLJ 91.

n 38See the discussion above.

n 39Clause 26(2) of Schedule H to the Housing Development (Control and Licensing)

Regulations 1989.

n 40[1988] 2 MLJ 170.

n 41[2001] 2 MLJ 711.

n 42[1984] 2 MLJ 268, at p 270.

n 43See Ahmad Moosdeen, On Assignment as Security and s 4(3) of the Civil Law Act 1956 ,[2001] 4 MLJ cxciii, and Baljit Singh Sidhu, Assignment as Security for Loan to Buy



Property: Absolute or By Way of Charge Only? [2001] 4 MLJ ccxxi.

n 44[1999] 3 MLJ 157.

n 45Clause 7 of Schedule H to the Housing Development Regulations 1989.


n 47See website

http://www.kpkt.gov.my/kpkt[lowbar]en/main.php?Content=sections&SectionID=5

(Accessed on 4 June 2006)

n 48See the definition of homebuyer in s 16A of the Housing Development Act 1966.

n 49[2006] 1 MLJ 339.

n 50Section 16M of the Housing Development Act 1966.

n 51Section 16O of the Housing Development Act 1966.

n 52Section 16P of the Housing Development Act 1966.

n 53Parliamentary Debates, Dewan Rakyat, 11 October 2001, column 79.

n 54Section 16U of the Housing Development Act 1966.

n 55Section 16AC of the Housing Development Act 1966.

n 56Clause 23 of Schedule G and cl 26 of Schedule H to the Housing Development

Regulations 1989.

n 57Clause 26(1) of Schedule G and cl 30(1) of Schedule H to the Housing Development

Regulations 1989. Clause 26(1) of Schedule G also provides that if the developer fails to

rectify the defects after due notice, the purchaser may effect the repairs and recover the costs

from the developer s solicitors who hold 5% of the purchase price as stakeholders.

http://www.kpkt.gov.my/kpkt%5blowbar





n 58See Sakinas Sdn Bhd v Siew Yik Hau & Anor [2002] 5 MLJ 497, pp 515-516.


n 60According to The Sun on 8 May 2006, the Ministry of the Housing and Local

Government may extend the defect liability period to 36 months. This can be done by

amending Schedules G and H to the Housing Development Regulations 1989.

n 61The Star , 5 June 2006, at M.

n 62[2005] MLJU 225.

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