Court of appeal holds that Minister of Housing and Local Government is empowered to extend time for the delivery of vacant possession

The Court of Appeal in Bludream City Development Sdn. Bhd. v. Kong Thye & Ors and Other Appeals (Civil Appeal No.: B-01(A)-55-01/2020) delivered an important ruling in housing development law last week.

The Court of Appeal ruled that the Minister of Housing and Local Government is empowered to modify a housing contract to extend the time period for a developer to deliver vacant possession of a housing parcel to a purchaser.

This ruling is significant because it serves to limit the effect of the Federal Court decision in Ang Ming Lee & Ors v. Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan (2020) 1 CLJ 162. The Federal Court in Ang Ming Lee struck down Regulation 11(3) of the Housing Development (Control & Licensing) Regulations 1989, which empowered the Controller of Housing to extend time for a developer to deliver vacant possession. 

In the wake of the Ang Ming Lee decision, a number of housing developers have been beset with claims filed by purchasers for liquidated ascertained damages for the late delivery of vacant possession of their housing parcels.  

The Bludream City decision may well serve as a respite to developers as the ruling appears to dilute the effect of Ang Ming Lee.

The Bludream City appeals arose from 3 suits filed at the High Court by purchasers against the Minister’s decision to grant an extension of time of 17 months for a developer to complete the housing units in a service apartment. The High Court allowed the purchasers’ claims and found that the Minister’s grant of the time extension was unlawful in view of the Ang Ming Lee principle.

The Court of Appeal reversed the High Court ruling and made a series of pronouncements of wide effect in the housing industry.

First, the Court of Appeal clarified that the Ang Ming Lee ruling did not mean that the Regulation 11(3) power to modify the terms of a housing contract was unlawful in its entirety or that the Minister did not have the power to extend time for the delivery of vacant possession under that provision.

The Court of Appeal interpreted the Ang Ming Lee decision to mean that it was only the Controller of Housing that was not empowered to extend time. Justice Lee Swee Seng said that “The fact that the Controller has no power to make a decision under Regulation 11(3) or under Regulation 12 in an appeal from an invalid decision under Regulation 11(3) of the HDR”.

It was also observed that “the decision of the Federal Court cannot be read as striking down Regulation 11(3) of the HDR in its entirety. A holistic reading of the judgment must mean that Regulation 11(3) is ultra vires to the extent that it provides the Controller with the power to waive and modify the SPA...”

Moreover, the Court of Appeal recognised that the Minister was in fact entrusted by Parliament “under s. 24(2)(e) of the HDA to “regulate and prohibit the conditions and terms of any contract”” and thus had the power to extend the time for a developer to delivery vacant possession of a housing parcel.

Secondly, the Court of Appeal ruled that the Minister was not obliged to give the purchasers the right to be heard before granting a time extension for the delivery of their housing parcels.

This was because “there is no express requirement of a right to be heard that must be given to the Purchasers, what is important is that the Minister must act fairly, taking into consideration that the Purchasers here, being purchasers, are not obliged to consent to any extension of time implored by the Developer. The Minister is thus entitled to proceed on the assumption that the Purchasers would not agree to any extension of time”.

In explaining this requirement of fairness by the Minister, “the Court of Appeal observed that the Minister would have to “take the broader view as to whether the Developer would be in a position to complete the Project if they are at the same time being saddled with a claim for LAD which worked out to be about 12% of the purchase price of each Unit delayed if there had been no Second Extension”.

The Bludream City decision is of wide consequence for at least 2 reasons.

First, the ruling limits the Ang Ming Lee principle. By this ruling, the Regulation 11(3) power to extend time for the delivery of vacant possession would appear to be valid to the extent that it empowers the Minister (and not the Controller of Housing) to grant a time extension to a developer to delivery vacant possession.

Second, the reasoning of the Court of Appeal sanctions the Minister to consider the commercial impact of a refusal to grant a time extension to a developer. Such a consideration would entail balancing the developer’s exposure to a sizeable claim in LAD by purchasers against the developer’s financial ability to complete the housing project despite having to meet such claims for LAD. These commercial considerations have often been overlooked in past decisions on the subject.
 

Gregory Das is an advocate and solicitor of the High Court of Malaya.

Note: The content of this article is of a general nature and does not constitute legal or other advice or the provision of legal or other professional services, and shall not be relied upon as such.\

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