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Illegal and Unenforceable SPA: The Aftermath of Ang Ming Lee

Housing Development and Financing Facilities Series

UE E&C Sanjia (M) Sdn Bhd v. Lee Jeng Yuh & Anor And Another Appeal [2021] 10 CLJ 271

FACTS:

The Plaintiffs were purchasers of a residential housing project developed by the Defendant. The Sale and Purchase Agreements (“SPAs”) executed by the Plaintiffs with the Defendant is in the prescribed form of Schedule H made pursuant to the Housing Development (Control and Licensing) Regulations 1989 (“HDR”). Clauses 25 and 27 of the SPAs stated that the Defendant is to deliver vacant possession of the units and to complete common facilities within 48 months from the date of the SPAs, i.e on 14 October 2019.

Four months prior to the completion date, the Plaintiffs issued notices to the Defendant to terminate the SPAs on the basis of anticipatory breach of the fundamental terms of the SPAs. According to the Plaintiffs, the Defendant had not completed even half of the project’s construction at that time. The Plaintiffs demanded for the return of all monies paid towards the purchase price and for the Defendant to compensate the Plaintiffs for all costs and expenses incurred pursuant to the SPAs.

DECISION:

The Court of Appeal agreed with the High Court and held that the SPAs are in breach of Schedule H of the HDR and consequently rendering them to be illegal and unenforceable:

  • The basis of the illegality is the non-compliance in the period of the delivery of vacant possession and the completion of common facilities stipulated in the SPAs which in this case it is stated 48 months.
  • The prescribed Schedule H of HDR provides 36 months as the time period for the delivery of vacant possession and completion of common facilities.
  • Considering that the objective of the Housing Developers legislations is to protect the buyers against the developers, parties cannot contract out of the scheduled form.

Consequently, the Court of Appeal held that it is only fair and just to the parties to be put in their original position as if the SPAs had never been executed. The Court affirmed the High Court’s decision in allowing the Plaintiffs’ claim for restitution of all the expenses reasonably incurred for the purchase of the housing units.

TAKEAWAYS:

On 26.11.2019, the Federal Court in the case of Ang Ming Lee & Ors v. Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Anor And Other Appeals [2020] 1 CLJ 162; [2020] 1 MLJ 281 laid down an unparalleled ruling that the Housing Controller has no powers to modify the prescribed Schedule H in the HDR. This is because regulation 11(3) of the HDR, the basis on which the Housing Controller exercised its powers to grant an extension of time (“EOT”) (for the delivery of vacant possession of parcel and completion of common facilities) is ultra vires the Housing Development (Control and Licensing) Act 1966.

Notwithstanding that this case has followed and applied the principle in Ang Ming Lee, the Court of Appeal appears to have stretched the principle of Ang Ming Lee even further to the extent of deciding that the SPA was void ab initio (null and void from their inception) by virtue of the EOT granted by the Housing Controller. This is despite the fact that the EOT was merely reflected in two clauses of the whole SPA i.e Clause 25 and Clause 27 of the SPA.

The attempt to distinguish the case of Ang Ming Lee also did not find favour with the Court of Appeal. In this regard, the Court of Appeal held a firm and strict view that the issue of whether the approval is obtained before or after the SPAs have been executed is not relevant given the ruling of Ang Ming Lee is clear in that the Housing Controller has no power to modify the prescribed Schedule H. This is notwithstanding that parties have consented to the extended period when they executed the SPAs.

This case once again demonstrates the aftermath of the decision of Ang Ming Lee which continues and will continue to haunt (unless the same is reviewed or ruled otherwise by the Federal Court) the housing development industry and the past housing projects where the SPAs have concluded long ago. On that note, it is also worth highlighting that the Court of Appeal has further affirmed the retrospective effect of Ang Ming Lee to apply to past transactions. Up to the point of writing, the scale of justice seems to tilt in favour of the purchasers when it comes to construing the provisions in the prescribed SPA / Schedule H. 

Author
Legal Associate at Chee Hoe & Associates
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