The Federal Court today delivered a unanimous decision in respect of issues on liquidated ascertained damages (LAD) claims post the Ang Ming Lee case.
The unanimous decision in the case of Obata and Vignesh was made by a five-member bench led by the President of the Court of Appeal, YAA Tan Sri Abang Iskandar Abang Hashim and Federal Court Judges comprising YA Zabariah Mohd. Yusof, YA Dato’ Sri Hasnah Mohammed Hashim, YA Datuk Harmindar Singh Dhaliwal and YA Datuk Abdul Karim Abdul Jalil. The summary of the judgment was read by YA Dato’ Sri Hasnah Mohammed Hashim.
This alert discusses the Federal Court’s decision in Obata and Vignesh, and its impact on the homebuyers and developers in the housing development industry.
What is the Ang Ming Lee decision?
In 2020, the Federal Court’s decision in Ang Ming Lee has been a game changer in the housing development field.
A five-member bench then led by Chief Justice, YAA Tun Tengku Maimun Tuan Mat held that regulation 11(3) of the Housing Development Regulation 1989 which was relied upon to grant extension of time for the developer to deliver vacant possession by the Controller of Housing was invalid as it was ultra vires of the Housing Development Act 1966.
The decision in Ang Ming Lee at that time had not only impacted the housing development industry but also several High Court and Court of Appeal decisions such as in Alvin Leong Wai Kuan v Menteri Kesejahteraan Bandar and PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor, where courts were inclined to traverse down the path of providing maximum protection to homebuyers.
The Federal Court’s decision in Obata and Vignesh
(1) Limitations Challenge
The Federal Court noted that the background facts in Obata and Vignesh were distinctly different from that of Ang Ming Lee. In Obata and Vignesh, the extension of time for delivery of vacant possession was granted before the sale and purchase agreements (SPAs) were executed. Both buyers had executed the SPAs where it was expressly stipulated that the completion period and delivery period were 54 months. There was a delay in delivery of vacant possession by the developer but both Obata and Vignesh were paid the LAD as provided under the SPAs.
The question before the apex court was whether the cause of action arose after the decision of Ang Ming Lee or within 6 years after the execution of the SPAs?
The Federal Court held that if a claim for LAD where the cause of action accrued beyond 6 years before Ang Ming Lee, the claim was time barred. Both Obata and Vignesh were filed in 2020, thus both claims are barred by limitation, as the six year period had expired.
(2) Prospective Overruling
It was unanimously decided that the decision in Ang Ming Lee made by the Federal Court in 2020 was to be applied prospectively. Thus, the decision in Ang Ming Lee would not apply to an extension of time granted by a Controller prior to the decision in Ang Ming Lee. The Federal Court emphasised that they are not in any manner departing or revisiting Ang Ming Lee but they are merely refining it.
The Federal Court was of the view that if Ang Ming Lee were to have retrospective effect there would be serious ramifications and repercussions to the housing industry in Malaysia in particular, the developers who have placed reliance on the existing law and diligently complied with the laws which were at that time valid.
It is undeniable that the Federal Court’s landmark decision above has finally resolved the recent saga plaguing the housing industry by providing crucial clarity on the application of LAD claims in the post-Ang Ming Lee landscape.
26 July 2024