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Client Alert: Danga Bay Decision

As reported by Star News, on 7 July 2021 the Court of Appeal (“COA”) dismissed Johor based developer Country Garden Danga Bay Sdn Bhd’s appeal and in doing so upheld the decisions by the High Court and Tribunal of Homebuyers Claims to award seven buyers of a service apartment damages for late delivery claims (“Danga Bay decision”).

The issue which takes centre stage in the Danga Bay decision is one seen more frequently as of late with regards to contracts of sale under the Housing Development Act 1966 (“HDA”) being: -

Are liquidated damages (“LAD”) for late delivery of vacant possession (“VP”) calculated from the date of the sale and purchase agreement (“SPA”) or date of payment of booking fee?

Abiding by the precedent set by the Federal Court’s decision in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor (“PJD decision”), the COA ruled that in the event of late delivery of VP for Schedule G and/or H type contracts under Regulation 11(1) of the Housing Development (Control and Licensing) Regulations 1989 (“HDR”), the date for calculation of LAD begins from the payment date of the booking fee, not the date of the SPA.

With this decision, the law on collection of booking fees vis a vis LAD for late delivery is now all the clearer. However, this comes only as the latest in a myriad of case laws surrounding this issue leaving housing developers understandably concerned being at the centre of it all. Hence, moving forward it would serve housing developers well to be aware of their position in light of the latest developments in this area of law: -

  1. The timeline for delivery of VP starts running from the date booking fees are paid and NOT the date of the SPA.

  2. This applies not only to future projects (post PJD decision) but also retrospectively (pre PJD decision) to ongoing and even completed projects which VP have already been delivered. Any claims by disgruntled homebuyers however will still be subject to the limitation period and also reliefs accorded to housing developers under the Temporary Measures for Reducing the Impact of Coronavirus Disease (COVID-19) Act 2020.

  3. Homebuyers will have twelve (12) months from the date of certificate of completion and compliance or last date of the defect liability period to claim for late delivery of VP.

  4. Any extension of time(s) (“EOT(s)”) for delivery of VP obtained by developers is not valid if such extension is/was granted by the Controller of Housing.

  5. On 14 May 2019, the Federal Court in Ang Ming Lee v Menteri Kesejahteraan Bandar held that the Minister of Housing is the only one who has the power under the HDA to regulate and modify the terms of the statutory SPA. Therefore, EOTs granted by the Controller of Housing (even if it is argued that the Controller was delegated such authority by the Minister) are invalid and Regulation 11(3) HDR which purportedly gives the Controller power to do so is ultra vires of the HDA (“Ang Ming Lee”).

  6. The High Court in (1) Kok Chay Har & Ors v BHL Realty Sdn Bhd and (2) Alvin Leong Wai Kuan & Ors v. Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Ors) in their rulings concurred with the stance taken in Ang Ming Lee. The High Court also expanded to state that the law applies retrospectively to EOTs which were granted before the Ang Ming Lee decision.

  7. The question on whether EOT(s) would be valid if granted by the Minister of Housing was unfortunately not answered in Ang Ming Lee and remains open until it is presented before the Courts again in a separate suit.

Overall, it is clear that the Courts have found a common and stern voice in upholding the HDA’s intended role as a social legislation designed for the protection of homebuyers. Therefore, unless and until the laws develop in their favour, developers may want to consider adjusting their usual practices to align with the recent court rulings to avoid unwanted and perhaps costly claims.

We will revisit this issue again once the official reported judgment of the Danga Bay decision is published.

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