Issues
Issue 2: Can the purchasers claim LAD from the defaulting abandoned housing developers for not completing the construction
the plaintiff suffered ‘was within their (defendant) contemplation’
within the rule in Hadley v Baxendale.
Similarly, in Wong Mee Wan v Kwan Kin Travel Services Ltd [1995] 4 All ER 745; [1996] 1 WLR 38 (Privy Council) on appeal from Hong Kong, another case dealing with breach of contract for a package tour. In this case, it was held that the tour operators were liable for damages for breach of an implied term to use reasonable skill in rendering services relating to the package tour. It was held that the tour operators were liable for their failure in providing the requisite skill and care when crossing a lake in China when the plaintiff’s daughter drowned.
In short, the law relating to the recovery of damages for inconveniences, distress, and anxiety has been restated in a number of cases. These cases include Watts v Marrow [1991] 4 All ER 937, Farley v Skinner [2001] 4 All ER 802 (House of Lords), and Ruxley Electronics and Construction Ltd v Forsyth, Laddingford Enclosures Ltd [1995] 3 All ER 268 (House Lords).
The author’s opinion is that the aggrieved purchasers in abandoned housing projects are entitled to wider and equitable damages for all the inconveniences, anxiety, and distress caused due to the default of the vendor developers to have abandoned the projects, apart from the damages as prescribed under the said agreements.
Alternatively, the terms and conditions of the said agreement should be amended to include non-pecuniary damages and un-liquidated damages as well as to give better protection to purchasers in the event of default by the vendor developers, particularly when the latter abandoned the projects. The purpose of these suggestions has two folds. Firstly, to give better protection to purchasers and provide greater confidence to purchasers in the Malaysian rule of law and legal system and the Malaysian housing industry. Secondly, to serve as a warning to discourage the vendor developer from abandoning their housing projects and comply fully with the terms and conditions of the said agreements.
Issue 2: Can the purchasers claim LAD from the defaulting
It is submitted if rehabilitation seems impossible and difficult to proceed, it is proposed that the aggrieved purchasers apply to the court for recession of the sale and purchase agreements entered into with the abandoned vendor developers and claim all monies paid and costs as well as the LAD calculated from the date of the promised delivery of the vacant possession of the purported units purchased until the date of the recession of the sale and purchase agreement. This is pursuant to the decision of Diong Tieow Hong & Anor v. Amalan Tepat Sdn. Bhd.
[2008] 3 MLJ 411 (High Court of Malaya at Kuala Lumpur). In this case, the plaintiffs entered into a sale and purchase agreement (S&P) with the defendant (developer) to purchase a condominium at the price of RM 287,900.00. The S&P was as per the prescribed Schedule H of the Housing Developers’ (Control and Licensing) Regulations 1989 (Schedule H). Pursuant to clauses 22 and 24 of the S&P, the defendant should deliver vacant possession of the property, complete with common facilities, on or before 14 October 1998. Unfortunately, the defendant failed to do so, and the project was abandoned. The plaintiffs had paid a total sum of RM 57,000.00 towards the purchase price. The plaintiffs, vide letter dated 8 March 2004, demanded the construction of the property be completed, and that vacant possession be handed over on or before 8 May 2004, failing which the S&P shall be deemed terminated. Again, the defendant failed to do so. The plaintiffs then initiated a claim against the defendant for, inter alia, declarations to the effect that the defendant had breached the terms of the S&P and that the plaintiffs had duly terminated the same, the refund of RM 57,900.00 and liquidated ascertained damages (LAD). This project was an abandoned housing project which fell under the jurisdiction and power of the Ministry of Housing and Local Government (MHLG) and was subject to the provisions of Act 118. The court decided that in abandoned housing projects, the aggrieved purchasers need not wait until the delivery of vacant possession of the units they purchased for them to claim damages, as this is impossible for them to obtain.
Instead, the aggrieved purchasers can rescind the sale and purchase agreement, claim for the return of all the payment they made to the defaulting abandoned housing developers and obtain damages for the late delivery of vacant possession, calculated from the date of the specified date for the delivery of vacant possession until the date of
the recession of the sale and purchase agreement. The plaintiffs were entitled to claim for LAD immediately after the expiry of the contractual deadline for the defendant to hand over the vacant possession. The plaintiffs do not require actual vacant possession of the housing units by the developer for them to claim LAD.
The liability of the defaulting abandoned housing developer to pay LAD to aggrieved victim purchasers despite there is no vacant possession is cemented in the case of Ganda Selat Sdn Bhd v. Mohammad bin MT Abu @ Ramli [2019] 1 LNS 1997 (High Court of Malaya at Kuala Lumpur) and Tan Sri G. Darshan Singh v Loke Kee Development Sdn Bhd &
Anor [2009] 7 CLJ 670 (High Court of Malaya at Kuala Lumpur).
It is noteworthy that if the actual completion and the delivery of VP took a very long time to materialise, this will mean the liquidated damages may outweigh the balance purchase price still unpaid. Can purchasers use this exorbitant LAD to offset the actual purchase price payment and claim the balance of damages in such a situation? In theory, yes, the purchasers can do so, following the principle in Keng Soon Finance Berhad v MK Retnam Holdings Sdn. Bhd (Bhagat Singh s/o Surian Singh & Ors, Intervers [1996] 2 MLJ 431; [1996] 3 AMR 3021 (High Court of Malaya at Kuala Lumpur), Neoh Khoon Lye v. Trans-Intan Sdn. Bhd [2002] 6 MLJ 8; [2002] 3 AMR 2655; [2002] 7 CLJ 420 (High Court of Malaya at Penang), S.E.A. Housing Corporation Sdn Bhd v. Lee Poh Choo [1982] 2 MLJ 31 (Federal Court at Kuala Lumpur) and Lee Poh Choo v S.E.A Housing Corporation Sdn Bhd [1982] 1 MLJ 324 (High Court of Malaya at Kuala Lumpur).
In Keng Soon Finance Berhad v MK Retnam Holdings Sdn. Bhd (Bhagat Singh s/o Surian Singh & Ors, Intervers [1996] 2 MLJ 431; [1996] 3 AMR 3021 (High Court of Malaya at Kuala Lumpur) which also involved an abandoned housing project, the high court held that the purchaser did not have to pay the balance of the purchase price as the damages for late delivery of his unit had been far greater than the balance purchase price payable, but not due under the sale and purchase agreement, as the purported purchased unit had been left abandoned indefinitely by the developer. This was because the purchaser was entitled to claim LAD right when the developer failed to deliver the vacant possession of the unit on time. The purchaser need not wait until the actual delivery of the vacant possession to claim the damages. This was because pursuant
to the previously repealed rule 12(1)(r) of the Housing Developers (Control and Licensing) Rules 1970, the developer was obliged to pay LAD immediately after the date of delivery of vacant possession as specified in the contract of sale if the developer failed to deliver the vacant possession on time as promised.
The courts’ decisions in Diong Tieow Hong, Ganda Selat Sdn Bhd, and Tan Sri G. Darshan Singh are commendable as the decisions guarantee the rights of the aggrieved victim purchasers in these cases to claim LAD despite the failure of the defaulting abandoned housing developers to deliver vacant possession. In addition, according to Keng Soon Finance Berhad, Neoh Khoon Lye, Sea Housing Corporation Sdn Bhd, and Lee Poh Choo, the aggrieved victim purchases can offset the balance purchase price with the unpaid LAD of the defaulting developers.