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STARTING DATE FOR CALCULATION OF LIQUIDATED ASCERTAINED DAMAGES

By:

Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh@luibhullar.com]

Bryan Lui Shien Vieng (Co-Managing Partner) [bryan@luibhullar.com]




INTRODUCTION

The Court of Appeal decision of Sri Damansara Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Ors [2020] 1 LNS 1090 (“Sri Damansara”) faced two issues as follows:




Issue 1 – Whether the calculation of liquidated ascertained damages (“LAD”) for delivery of vacant possession (“VP”) by developers pursuant to the Housing Development (Control and Licensing) Act 1966 (“HDA") starts from the date of payment of the deposit or from the date of the sale and purchase agreement (“SPA”).


Issue 2 – Whether calculation of LAD should be allowed based on purchase price as stated in the SPA or based on the actual purchase price paid by the purchaser which may be less than the price as stated in the SPA.


This Court of Appeal decision of Sri Damansara ought not to be confused by another Court of Appeal decision of Sri Damansara Sdn Bhd v Voon Kuan Chien & Anor [2020] 5 CLJ 619.


BACKGROUND FACTS


The 2nd and 3rd Respondents purchased two (2) units of properties sold by the Appellant (the developer of Foresta Damansara).


The 2nd and 3rd Respondents paid a deposit of RM10,000.00 respectively on 6th January 2012. Subsequently, both the 2nd and 3rd Respondents and the Appellant entered into a SPA on 28th June 2012 respectively. However, the 2nd Respondent contended that he signed the SPA on 24th March 2012. The property prices were RM731,080.00 and RM887,880.00 respectively. Credit notes were issued by the Appellant to the 2nd and 3rd Respondents for the sums of RM63,108.00 and RM78,788.00 respectively as a rebate for the balance of the deposit of 10% on the purchase price. On 22nd December 2015, the Appellant issued a notice that VP was delivered.


Both the 2nd and 3rd Respondents filed a claim with The Tribunal for Home Buyers Claims (“Tribunal”). The Tribunal decided that the calculation for LAD should commence from the date of payment of the and the calculation of the LAD should be based on the purchase price as stated in the SPA.


The Appellant applied for judicial review and the High Court dismissed the claim as the decision of the Tribunal could not be impugned on any of the accepted grounds of challenge such as illegality, irrationality or unreasonableness or procedural impropriety.


THE COURT OF APPEAL

ISSUE 1


In regard to the first issue (whether LAD is calculated from the date of payment of the deposit or from the date of the SPA), the Appellant relied on Clause 25(1) of the SPA which stated that VP shall be delivered to the Purchaser within forty-two (42) months of the SPA.


The Court of Appeal agreed with the position taken by the Tribunal and the High Court where they considered themselves bound by the decisions of the apex courts in Hoo See Sen & Anor v. Public Bank [1988] 1 CLJ Rep 125 ("Hoo See Sen") and Faber Union Sdn Bhd v. Chew Nya Sheng & Anor [1995] 3 CLJ 797("Faber Union"). In Hoo See Sen, the Supreme Court held that the date of the SPA was the date the booking fee was paid. In Faber Union, the Supreme Court pronounced that date for the delivery of VP should the date of payment of booking fee and not the date of the SPA.


The Court of Appeal noted that the relevant clause setting out the time for delivery of VP in both the cases of Hoo See Sen and Faber Union was similar to Clause 25 of the SPA in Sri Damansara.


The Court of Appeal held that the contract came into existence on the date the deposit was paid as the signing and dating of the prescribed form of SPA pursuant to the Housing Development (Control and Licensing) Regulations 1989 (“HDR”) became a mere formality. This was in accordance with the Federal Court decision of Daiman Development Sdn Bhd v Mathew Lui Chin Teck and Another Appeal [1978] 1 LNS 42 (“Daiman Development”) where the Federal Court held that a booking pro forma was a firm contract because it identified the parties, it specified the property to be purchased and its price. The Federal Court held that it cannot therefore be said that the booking pro forma was, “a mere agreement to agree.”


The Court of Appeal also took cognisance of the fact that the HDA was enacted for the protection of the home buyers as home buyers would not have the equal bargaining strength with the powerful and mighty Developer and it would be prejudicial and detrimental to the purchaser that having paid the deposit, the Developer could arbitrarily or unilaterally fix a date to execute the SPA and extend the time to deliver VP. Parliament intended to balance the differential power between the purchaser and the developer.


Accordingly, the proper date was the date of payment of deposit.


ISSUE 2


In regard to the second issue (whether calculation of LAD is according to the purchase price in the SPA or actual purchase price paid), the Appellant contended that since 10% rebate was given to the purchase price, the calculation of LAD ought to be based on the discounted purchase price.


The Court of Appeal stated that the clauses in the SPA were unambiguous that LAD is to be calculated from the agreed purchase price. As the SPA did not mention any rebate and that the SPA is prescribed and regulated by statute, parties could not include additional clauses especially those that remove the protection of home buyers.


Accordingly, the calculation is based on the purchase price as stated in the SPA.


CONCLUSION


The Federal Court in Daiman Development took the position as mentioned above that a booking pro forma was a firm contract as it identified the parties, it specified the property to be purchased and its price even though both the developer and purchaser had to execute a SPA prepared by the developers’ solicitors and subject to the terms and conditions therein, and no draft agreement was even shown to the purchaser.


Similarly, although Sub-Regulation 11(2) of the HDR clearly prohibits the collection of any prior payment before the signing the SPA, in reality, collections of booking fee / deposit do occur. As collections of booking fee / deposit is usually witnessed by a booking / deposit form, it mirrors a booking pro forma like in Daiman Development. It would identify parties, specify the property and its price.


As the HDA is a social legislation and the judiciary ought to consider the protection of the home buyers, it would only be appropriate to arrest such conduct by developers and consider the date of collection of the booking / deposit fee as the date of the SPA as the SPA would have been formed when the booking fee / deposit was collected. Therefore, Sri Damansara ought to be celebrated as a Court of Appeal decision that gave effect to the protection of the home buyers in a HDA and HDR prescribed form SPA scenario.

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