art s&p late completion

7/31/2019 Art s&p Late Completion

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

LENGTH: 12875 words

TITLE: Article: DELAY IN THE COMPLETION OF A NEW RESIDENTIAL

PROPERTY: RIGHTS OF THE PURCHASER

AUTHOR: Chan Wai Meng LLB (Hons) (Malaya), LLM (Malaya) Lecturer, Department of

Business Strategy and Policy Faculty of Business and Accountancy, University of Malayaand

Usharani Balasingam LLB (Hons) (Malaya), LLM (Malaya )Lecturer, Taylor's College

Subang Jaya

TEXT:[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 'TowardsDeveloping 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 affected1

. This paper discusses the rights of a purchaser of a residentialproperty 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.

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 properties 2. In fact, the act is 'a specific piece of legislation to

protect house buyers from unscrupulous developers' 3.
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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

conditions for the grant of the licence is that the applicant must have deposited at least

RM250,000 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 a


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license 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.

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 & Anor7

:

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 the

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


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Schedule G.

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 inLim Eh Fa & Ors v Seri Maju Padu 13.

InLim 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 the

contract 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 the1989 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:

(1) 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 Uniform 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.(2) The delivery of vacant possession by the vendor shall be supported
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by:

(a) 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

the Certificate of Fitness for Occupation have been duly complied

with; and

(b) 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.

(3) 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.

(4) 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 theauthority 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 the

application 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 be shown below that this method for the

computation 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 formulafound in the predecessors of the Housing Development Regulations 1989, namely, r 12(1)(r)
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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 inInsun 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.

InInsun 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 the

developer 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 thebreach 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 inInsun Development Sdn Bhddistinguished the facts in the case from

those inLoh Wai Lian v SEA Housing Corporation Sdn Bhd 17. InLoh 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 inLoh 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 liquidated 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 forliquidated damages accrued then.
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Unlike the contract of sale inLoh Wai Lian, the contract of sale inInsun Developmentdid not

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

formula inInsun Developmentwas the formula found in all standard contracts of sale of new

residential 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 inLoh Wai Lian for liquidated damages for late

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

stipulates 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 to 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 arises only 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:
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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 purchaser

of 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 22provides 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 asimilar 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 mutual 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 agreed in 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 thepurchaser to terminate the contract which is in the form currently prescribed in Schedule G to


9/25

the 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 25and 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 developer 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 to

amount 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 Bhd28

, the purchaser entered intoa 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
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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 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.

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 the

developer 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 vNewacres Sdn Bhdand Thomas a/l Iruthayam v LSSC Development Sdn Bhdare 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 conferred

on 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 Fookalso 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 thecontract of sale within a reasonable time, particularly where the developer has not abandoned


11/25

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

an 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 rely

on 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 inMuradlihar Chatterjee v

International Film Co Ltd 33, an innocent party who exercises his right to terminate the

contract 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 inApex 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. The

purchaser 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.

Another important issue is whether the purchaser who has rightfully terminated the contract ofsale may claim for the liquidated damages pursuant to cl 23(2) of Schedule G 36in lieu of the
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12/25


13/25

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 inHoo See Sen v Public Bank Bhd & Anor 40and 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 in

any 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 disbursingthe loan. The financier held the loan sum on behalf of the purchaser 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 inHoo See Sen may no longer applies for the

following reasons. First, inHoo 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 vacant

possession 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 inHoo 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 toprotect itself. Since s 183 of the Contracts Act 1950 provides that an agent is not personally
https://vpn.utm.my/research/,DanaInfo=www.lexis.com,SSL+retrieve?cc=&pushme=1&tmpFBSel=all&totaldocs=&taggedDocs=&toggleValue=&numDocsChked=0&prefFBSel=0&delformat=XCITE&fpDocs=&fpNodeId=&fpCiteReq=&brand=&_m=a8db18ce961b7fee31f290e817dd12df&docnum=42&_fmtstr=FULL&_startdoc=1&wchp=dGLzVlb-zSkAl&_md5=c5dff351e9eae1eef765cbfd3fc330b8&focBudTerms=&focBudSel=all#n40https://vpn.utm.my/research/,DanaInfo=www.lexis.com,SSL+retrieve?cc=&pushme=1&tmpFBSel=all&totaldocs=&taggedDocs=&toggleValue=&numDocsChked=0&prefFBSel=0&delformat=XCITE&fpDocs=&fpNodeId=&fpCiteReq=&brand=&_m=a8db18ce961b7fee31f290e817dd12df&docnum=42&_fmtstr=FULL&_startdoc=1&wchp=dGLzVlb-zSkAl&_md5=c5dff351e9eae1eef765cbfd3fc330b8&focBudTerms=&focBudSel=all#n40https://vpn.utm.my/research/,DanaInfo=www.lexis.com,SSL+retrieve?cc=&pushme=1&tmpFBSel=all&totaldocs=&taggedDocs=&toggleValue=&numDocsChked=0&prefFBSel=0&delformat=XCITE&fpDocs=&fpNodeId=&fpCiteReq=&brand=&_m=a8db18ce961b7fee31f290e817dd12df&docnum=42&_fmtstr=FULL&_startdoc=1&wchp=dGLzVlb-zSkAl&_md5=c5dff351e9eae1eef765cbfd3fc330b8&focBudTerms=&focBudSel=all#n40


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bound by a contract with a third party where the agent made the contract on behalf of his

principal, the financier should expressly state in its undertaking to the developer

art s&p late completion

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