Federal Court overturns Tribunal’s ruling – balcony in show unit not part of SPA

The Federal Court recently delivered a significant ruling on the powers of the Tribunal for Homebuyer Claims and the principle of estoppel in housing development disputes. The ruling came on Feb 14 in the case of Country Garden Danga Bay Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Another (2020).

The case arose from a challenge against the Tribunal’s decision that allowed a purchaser’s claim for damages against the developer for alleged unauthorised variations to the specifications of an apartment unit under the sale and purchase agreement (SPA). The apartment unit was part of Country Garden Danga Bay’s project in Johor.

After vacant possession of the unit was delivered, the purchaser renovated the unit. The purchaser then filed a claim against the developer at the Tribunal and complained that the unit was contrary to the specifications under the SPA. The purchaser alleged the unit should have included a covered balcony as seen in the show unit prior to the purchase. 

At the Tribunal proceedings, a technical team was directed to inspect the unit to assess the veracity of the purchaser’s complaints. Subsequently, the Tribunal found there to be sufficient evidence to support the purchaser’s claim. The Tribunal then directed that the purchaser be paid RM50,000 by the developer in compensation.

The developer’s challenge against the Tribunal’s decision failed at the High Court and the Court of Appeal. However, the Federal Court reversed the decision of the Court of Appeal and struck down the decision of the Tribunal. In so doing, the Federal Court made pertinent pronouncements on the housing development laws in the country.

The Federal Court first recognised that a covered balcony was not required in the SPA. This led to the finding that the Tribunal’s decision was unlawful because “Subsection 16N(2) of the [Housing Development] Act provides that the Tribunal’s jurisdiction shall be limited to a claim based on a cause of action arising from the SPA entered into between the homebuyer and the housing developer”.

Accordingly, it was held that “the Tribunal was wrong when it varied the content of specifications under the SPA ... the Tribunal would have no power to rectify the SPA by the addition or exclusion of terms inconsistent with the statutory terms provided in either Schedule G or H of the [Housing Development] Regulations. The power of the Tribunal to vary or set aside the contract wholly or in part under section 16Y(2)(e) of the Act is only when there is a clause in the SPA which is inconsistent with the statutory terms of the Schedule”.

Next, the Federal Court rejected the purchaser’s claim of inconsistency between the unit and the SPA on the grounds that the purchaser had accepted vacant possession of the unit and had taken steps to renovate the unit.

Federal Court judge Zaleha Yusof ruled that the purchaser could not claim that “he got the wrong unit, but on the other hand accepted delivery of vacant possession and renovated it... We were of the view that the Tribunal was wrong when it failed to appreciate that the second respondent had affirmed the contract as it stood on its terms which did not have a term for a covered balcony, when the second respondent accepted delivery and renovated the said unit”.

The Federal Court’s judgment sets an important precedent on the powers of the Tribunal in determining claims of purchasers. Such claims are to be determined on the express terms of the SPA and cannot be premised on representations made prior to the execution of the contract. This means that the Tribunal is not empowered to determine claims of purchasers based on statements made to them by salespersons at the showrooms of developers, as an example.

Further, the Federal Court decision is significant in limiting the claims that can be made against developers where purchasers have accepted vacant possession of the housing unit. In such instances, it would be difficult for a purchaser to successfully claim for losses that arise from alleged inconsistencies between the unit and the SPA, particularly where the purchaser has renovated the unit.  

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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