Property News

Federal Court’s judgement in Ang Ming Lee case relieves developers from retrospective suits

KUALA LUMPUR (July 26): On Nov 26, 2019, the Federal Court, which is Malaysia’s apex court, delivered a judgement to declare Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 as void in Ang Ming Lee & Ors vs Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals (AML). The decision of the Federal Court effectively rendered earlier decisions of the Controller of Housing in granting an extension of time to developers to deliver vacant possession as null and void. In Malaysia, a judgement of a court applies retrospectively, meaning that a new interpretation of the law would apply to situations or transactions that occurred before the judgement was delivered. Despite the AML being handed down in November 2019, homebuyers began commencing lawsuits against developers for late delivery of vacant possession, for sale of property as far back as 2013.
The immediate aftermath of the AML led to a series of conflicting decisions in the Malaysian courts. While some courts attempted to distinguish the AML, most courts applied the AML strictly, which led to uncertainties in the legal landscape of the housing industry. Developers were left in a rut, as they were forced to pay liquidated ascertained damages for late delivery of vacant possession, despite having followed the law and procedure that was laid down by the Ministry of Housing and Local Government prior to the AML decision. This retrospective application left developers feeling wronged, as they were suddenly held liable for late delivery of vacant possession. There was nothing that they could have done to defend themselves from the oncoming lawsuits by homebuyers for actions that were taken in accordance with the law, as was understood before the AML ruling.
Today, on July 26, the Federal Court addressed the ramifications of the AML. The Federal Court in Prema Bonanza Sdn Bhd vs Vignesh Naidu A/L Kuppusamy Naidu (Prema Bonanza) and two other appeals, clarified that the decision of the AML is to be applied prospectively. This means that the decision in the AML in annulling Regulation 11(3) will only apply to future cases going forward, from the date of the judgement. Regulation 11(3) has been in force since 1989 and was the basis for developers to apply for an extension of time, and to plan and develop housing projects. For the past 30 years, Regulation 11(3) was a deeply entrenched law in Malaysia. Due to the wide-ranging and significant impact of Regulation 11(3), the AML could not have been intended to apply retrospectively, as it would be impractical and unfair.
What now for homebuyers? Homebuyers can be rest assured that their right to claim for damages for late delivery of vacant possession remains unchanged. However, homebuyers who purchased their properties prior to November 2019, may no longer leverage on the AML to claim for damages on the basis that the extension of time given by the Controller of Housing is void. Essentially, homebuyers who purchased their properties before November 2019 can still seek for damages for delays; however, the basis of their claims must align with the regulatory framework, as it was understood before the AML decision.
What has changed in the housing industry? It is business as usual for the housing industry. With the decision of Prema Bonanza, developers can now operate without the fear that they may be subject to liquidated ascertained damages on the basis that the extension of time that they have obtained before November 2019 is void. The only change in the housing industry is that developers would now have to seek for an extension of time to deliver vacant possession directly from the Minister of Housing and Local Government.
The Prema Bonanza decision provides much needed clarity and stability in the housing industry, and the importance of understanding the temporal scope of legal rulings. For both developers and homebuyers, staying informed about current legal standards and regulatory changes remains crucial in ensuring that your rights remain protected.
Leonard Yeoh is a partner and Caleb Sio, a senior associate with law firm Tay & Partners.

Source: EdgeProp.my