In a landmark decision on 19 January 2021, the Federal Court unanimously held that Faber Union(1) is good law.
In total, there were seven appeals before the Federal Court by purchasers and housing developers. The key question that the court considered was where there is a delay in the delivery of vacant possession, does the date for the calculation of liquidated and ascertained damages (LADs) begin on the date of the payment of the booking fee or on the date of the sale and purchase agreement (SPA)?(2)
This article refers to the appeals pertaining to GJH Avenue Sdn Bhd.(3)
The GJH Avenue appeals comprised three appeals by purchasers of units of bungalows under a Schedule G statutory contract as prescribed under the Housing Development (Control and Licensing) Regulations (HDR) 1989. One of the bungalow units is known as Unit Number L274/PT Number 5415.
The relevant timeline is as follows:
- On 24 October 2011 the purchaser paid booking fees of RM5,000.
- On 13 December 2011 the purchaser paid a 10% deposit.
- On 13 February 2012 an SPA was entered into.
Clause 22 of the SPA stated that vacant possession of the unit must be delivered within 24 months from the date of the SPA (ie, 14 February 2014).
A key issue arose as to whether the date for the calculation of LADs began on 24 October 2011 (the date of the payment of the booking fees) or 13 February 2012 (the date of the SPA).
The developer stated that vacant possession was late by two days (calculating LADs from the date of the SPA – namely, 13 February 2012).
The purchaser filed a claim with the Tribunal for Homebuyer Claims for a larger sum of LADs (calculating the LADs from the date of payment of the booking fee – namely, 24 October 2011).
The tribunal allowed the purchaser's claim and granted LADs of RM12,353.76. Dissatisfied with the tribunal's finding, the developer filed a judicial review application at the high court to quash the decision.
The high court dismissed the developer's judicial review application and held that the tribunal was correct in holding that time began to run from the date on which the booking fee was paid and not the date which appeared on the SPA. In so doing, the high court judge held, among other things, that he was bound by Faber Union and Hoo See Sen.(4)
Dissatisfied with the high court's decision, the developer appealed to the Court of Appeal. The Court of Appeal reversed the high court's decision and held that based on the clear and unambiguous wordings of the SPA, time began to run from the date of the SPA. Further, the Court of Appeal sought to distinguish the facts of the GJH Avenue appeals and Faber Union and Hoo See Sen.(5) The purchaser then appealed to the Federal Court.
The Federal Court allowed the purchaser's appeal and held, among other things, that where there is a delay in the delivery of vacant possession in respect of scheduled contracts under the HDR, the date for the calculation of LADs begins on the date of payment of the booking fee and not on the date of the SPA.
Briefly, the grounds of the Federal Court's landmark decision are as follows:
- Faber Union is good law.
- The Housing Development (Control and Licensing) Act (HDA) 1966 and its subsidiary legislation are social legislation and, as such, should be interpreted to give effect to the intention of Parliament.
- "[E]ven where a term or provision of a social legislation or a statutory contract enacted thereunder is literally clear or unambiguous, the Court no less shoulders the obligation to ensure that the said term or provision is interpreted in a way which ensures maximum protection of the class in whose favour the social legislation was enacted."
- The Hansard which recorded the enactment of the HDA provides that "legislative measures should be taken to protect the people from bogus and or unscrupulous housing developers".
- Regulation 11(2) of the HDR expressly prohibits the collection of booking fees howsoever they are called.
- A valid and binding contract came into being when the purchaser paid the booking fee to the developer and bargain was made at the time of the payment of the booking fee.
- Notwithstanding that it is standard commercial practice to collect a booking fee, the court (with regard to the social purpose of the HDA and its subsidiary legislation) will uphold the statutory safeguards to ensure maximum protection of purchasers.
The apex court's decision seems to have put to rest the diametrical stand often adopted by housing developers and purchasers pertaining to calculation of LADs.
As it stands, the date of payment of the booking fee (and not the date that appears on an SPA) is the starting date for the purposes of calculation of LADs.
Endnotes
(1) Faber Union Sdn Bhd v Chew Nyat Shong [1995] 2 MLJ 597.
(2) In Hoo See Sen v Public Bank Berhad [1988] 2 MLJ 170 and Faber Union Sdn Bhd v Chew Nyat Shong [1995] 2 MLJ 597, the Supreme Court considered, where there is a delay in the delivery of vacant possession by a developer to the purchaser in respect of Schedule G or H-type contracts under Regulation 11(1) of the HDR enacted pursuant to Section 24 of the HDA, whether the date for the calculation of LADs begins on the date of the payment of the deposit, booking fee, initial fee or expression by the purchaser of its written intention to purchase or on the date of the sale and purchase agreement.
(3) 01(i)-40-12/2019; 01(f)-42-12/2019(M); 01(f)-41-12/2019(M).
(4) Hoo See Sen v Public Bank Bhd [1988] 1 CLJ (Rep) 125.
(5) GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah [2020] 3 CLJ 307.
