PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah and Ng Chee Kuan and other appeals [2021] 2 MLJ 60
PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah and Ng Chee Kuan and other appeals [2021] 2 MLJ 60 ("PJD Regency") is a Federal Court decision which largely discussed the calculation of liquidated ascertained damages ("LAD") where there is late delivery of vacant possession.
Briefly, from a homebuyer's perspective, a homebuyer is entitled to claim for LAD for late delivery of the property and also for late delivery of common facilities.
FEDERAL COURT DECISION
PJD Regency concerns 3 sets of cases, altogether 7 appeals being heard one after another.
The significance of the decision in PJD Regency is as such:
- Where there is a delay in delivery of vacant possession by a developer to the purchaser, the period for delivery of vacant possession commences from the date the purchaser paid the booking fee and not the date of the sale and purchase agreement.
- The Housing Development (Control and Licensing) Act 1966 ("HDA") and its subsidiary legislation are social legislation, which aim to afford statutory protection to homebuyers.
- Date of completion of common facilities is the date of issuance of the Certificate of Completion and Compliance ("CCC").
- Collection of booking fees is illegal.
INTERPRETATION
Surprisingly, although collection of booking fees has been a common practice, it is absolutely prohibited and illegal under Reg 11(2) of the Housing Development (Control and Licensing) Regulations 1989 ("HDR 1989"). The "contract of sale" as stated in Reg 11(2) of the HDR 1989 refers to the statutory sale and purchase agreement prescribed under the HDA which does not at all provide for such collection. Developers who collected booking fees are in express contravention of Reg 11(2) of the HDR 1989 and have committed an offence under Reg 13(1) of the HDR 1989. Anyone who solicits or advises or encourages the developers to do so have similarly committed an offence under Reg 13(1) of the HDR 1989.
The rationale behind the prohibition is understandable which is to accord maximum protection to a weaker class of persons from unscrupulous developers who having collected booking fees may take advantage by either procrastinating on construction of the housing project or formalisation of the sale and purchase agreement.
What is more important as between the purchasers and the developers is that if there is a collection of booking fees, then how should the liquidated ascertained damages for late delivery be calculated? The problem this poses is that the developers may abuse the process and take the opportunity to put whichever date they wish with a view to extend the date to deliver vacant possession.
The Federal Court took a purposive instead of literal approach in interpreting the express wordings of Clause 24(1) in Schedule G or Clause 25(1) in Schedule H of the HDA - "from the date of the agreement". Although the statutory phrase seems very clear and unambiguous, the Federal Court took the position that the HDA being a piece of social legislation had to be given a purposive interpretation by tipping the scales of justice in favour of the purchasers given the disparity in bargaining power between them and the developers.
Even though developers or those who collected booking fees expressly contravened Reg 11(2) of the HDR 1989 and thereby committed offences under Reg 13 of the HDR 1989, but that did not render the agreements illegal as they were based on statutory contracts. It was not the contracts per se that were illegal, rather it was their performance which had violated the strict terms of Reg 11(2) of the HDR 1989 or Schedule G / H of the HDA.
In construing the illegality against the developers, they would be bound from when the booking fees were paid and would have to bear the full extent of the LAD payable by them consistent with the overall intent of the written law in respect of late delivery of vacant possession. If the developers are bold and brazen in collecting booking fees, then they must bear the consequence of having LAD computed from the date when the booking fees was paid. Deciding otherwise would dampen the spirit of the HDA as a social legislature designed to protect the purchasers.
THE LEGAL IMPACT OF PJD REGENCY DECISION
i. Can the Federal Court decision be applied retrospectively, i.e. does this decision apply to projects completed pre-PJD decision?
It is a general rule that a written law has retrospective effect, this is established in Birmingham City Corporation v West Midland Baptist (Trust) Association (Incorporated) [1969] 3 All ER 172.
The exception to this general rule is if the courts invoke the rule of prospective overruling, the written law will not have a retrospective effect. The rule of prospective overruling was observed in Public Prosecutor v Dato' Yap Peng [1987] 2 MLJ 311 and Sinnaiyah & Sons Sdn Bhd v Damai Setia Sdn Bhd [2015] 5 MLJ 1.
The Federal Court in the PJD Regency case did not make a prospective ruling when coming to its decision. The Court further highlighted that the HDA is a social legislation. Therefore, this decision has a retrospective effect on projects completed prior to this Federal Court decision.
ii. Can a purchaser who has taken vacant possession of a project completed prior to the PJD decision claim LAD for delivery of vacant possession?
The short answer to this is yes.
Applying the same principle as set out above, the PJD Regency decision has a retrospective effect. This is however subject to the limitation period in Reg 3 of the Housing Development (Tribunal and Homebuyer Claims) Regulation 2002 or Section 6(1) of the Limitation Act 1953.
Under Reg 3 of the Housing Development (Tribunal and Homebuyer Claims) Regulation 2002, a purchaser must bring a claim no later 12 months from the date of issuance of CCC for housing accommodation or common facilities, the expiry date of the defect liability period set out in the sale and purchase agreement or the date of termination of sale and purchase agreement if such termination occurred before the date of issuance of CCC.
iii. Assuming a purchaser had claimed and been awarded LAD by the Homebuyers Tribunal, can the purchaser file a fresh claim at the Court for the remaining LAD based on the PJD Regency decision?
The purchaser is not able to file a fresh claim at the Court if he or she has been awarded LAD at the Homebuyers Tribunal.
This is because the claim would have been heard and decided by the Homebuyers Tribunal and this means that the issue of LAD has been decided. The principle of res judicata would thus bar the purchaser from further attempting to argue on this issue.
CONCLUDING THOUGHTS
It remains the issue of collecting fees that has sparked most debates and mixed feelings between the purchaser and the developers because the practice of collecting booking fees may not be necessarily bad for the purchaser. It is after all designed for the mutual benefit of both parties as this allows the purchasers to reserve a unit which they are interested to buy and accords the developers an indicator of the popularity of their project.
Although the collection of booking fees is illegal, it should not be void or invalid because it will be more detrimental to the purchasers. The moment a booking fee is made in relation to the purchase of property, it means that a contract of sale has been formed. So, payment of the booking fee constitutes offer and acceptance, hence forming an intention to enter into a contract since there is a meeting of minds. Under certain circumstances, it can be refunded as well for example where the purchasers' loan is not approved by financial institutions.
THE END.
Originally published October 2022.
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