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Country Garden Pacificview Case: Dispute Over Refund Upon Cancellation Of SPA






When a developer fails to deliver vacant possession within the stipulated time as stated in the sale and purchase agreement (SPA), the calculation of liquidated ascertained damages (LAD) starts from the date of payment of the booking fee or any form of payment by a purchaser to a developer towards the purchase price of a property.

 

What would be the scenario if the SPA had been signed by the purchaser and booking fee has been paid to the developer, but the SPA had not been signed by the developer? Would both parties be bound by the terms of the SPA despite one party not having signed the SPA?

 

In Country Garden Pacificview Sdn Bhd v Anand Raj Giri Haripasar Giri [2021] 1 LNS 1057, the purchaser disputed the refund made to him by the developer upon the cancellation of the property purchase. 

 

Background Facts

 

On 11 October 2017, the purchaser signed an SPA together with other documents such as the sales form for the purchase of a flat from the developer. Subsequently, the purchaser made four separate payments amounting to RM 80,445.20 towards the purchase price of the property. The SPA was only signed by the developer almost 10 months after the purchaser had signed the SPA, i.e. on 7 August 2018.

 

The purchaser eventually changed his mind about the contract and refused to proceed with the purchase of the property. To record the cancellation of the purchase, the developer and purchaser signed the deed of revocation on 18 January 2019. Pursuant to the terms of the deed, after deducting 10% of the purchase price as agreed liquidated damages and costs incurred by the developer (amounting to RM71,529.40), the developer refunded the balance sum of RM 8,916.68 to the purchaser.

 

The purchaser, being dissatisfied with the amount refunded, filed an action against the developer, claiming that he was entitled to only a deduction of RM500 instead of the RM 71,529.40 which was deducted pursuant to the deed. The purchaser relied on clause (f) of the sales form (which he had signed on 11 October 2017) to support his claim. The said clause (f) read as follows:

         

“In the event of any cancellations of purchase herein by me/us for any reason whatsoever, I/we hereby confirm and agree that you shall be entitled to charge 5% deposit as administrative fee and the balance of the deposit will be refunded to me/us free of interest and thereafter I/we shall have no claims whatsoever against you and/or the Property and you shall be entitled to deal with the Property in any manner you deem fit without further reference to me/us.” 

 

The Parties’ Contention

 

The purchaser argued that the SPA took effect on 7 August 2018 as the SPA was signed by the developer only then. Therefore, the purchaser’s cancellation of the purchase was made pursuant to the sales form and as such, only a deduction of RM500 should be made based on clause (f) of the sales form.

 

On the other hand, the developer claimed that the SPA came into force on 11 October 2017, which was the day the purchaser had signed the SPA and made initial payment. As such, the purchaser was subjected to the terms in the SPA. Accordingly, the developer was entitled to forfeit 10% of the purchase price.

 

The High Court’s Ruling

 

The High Court agreed with the developer’s submission and relied on the Federal Court’s decision in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor [2021] 2 CLJ 441. Reference was also made to earlier High Court decisions in Faber Union Sdn Bhd v Chew Nyat Shong & Anor (1995) 2 MLJ 597 and Lim Eh Fah & Ors v Seri Maju Padu [2002] 4 CLJ 37. The Court found that the date the deposit was made was the date when the contract was struck and that was the date the purchaser had assumed responsibility to fulfil his part of the bargain.

 

Accordingly, the SPA took effect on 11 October 2017 when it was signed by the purchaser together with the sales form and other documents. Although the developer did not sign the SPA until much later, a contract was nevertheless made on 11 October 2017 and parties were bound by it. Even though the SPA was only signed by the purchaser, it was enforceable if there was evidence that the developer had elected to be bound by it. This was demonstrated by the progressive billings issued by the developer to the purchaser and payments made by the purchaser to the developer towards the purchase of the property. The purchaser’s further conduct in voluntarily and unconditionally signing the deed fortified the parties’ obligation under the SPA.

 

Did The Sales Form Prevail Over The SPA?


The purchaser argued that the sales form amounted to a collateral contract and thus, should take precedence over the SPA. However, this argument was rejected by the High Court as clause (i) of the sales form clearly specified that the SPA will prevail in the event of any conflict.

 

Additionally, the High Court pointed out that the sales form applied only to the initial payment of the deposit, which was made by the purchaser at the point of signing the SPA and other documents. In fact, the purchaser had proceeded to make further payments to the developer, which was indicative that the sales form no longer applied, and that the SPA, being a statutory contract, prevailed pursuant to the Housing Developer (Control and Licensing) Act 1996 (HDA).

 

The Deed Of Revocation


The High Court also considered the fact that the deed of revocation was signed by the purchaser voluntarily and unconditionally. As such, the parties were bound by the terms of the deed, which included the payment of 10% of the purchase price as agreed liquidated damages to the developer. The deed indicates that the parties had contractually agreed on how they intend to regulate the purchaser’s repudiation of the SPA. The developer was merely exercising its contractual rights under the terms of the deed, which was mutually agreed by the parties.

 

The High Court found that it was inequitable for the purchaser to renege on the deed and argue otherwise.

 

The HDA As A Social Legislation

 

The High Court took cognizance that the HDA and the Housing Development (Control and Licensing) Regulations 1989 were social legislations aimed at protecting the interests of purchasers. However, it should not be a carte blanche for purchasers to ride roughshod over the rights of others. The Court observed that “justice is a two-way street” and the purchaser should bear the consequences of resiling from a contract that had already taken into effect.

 

Commentary

 

This decision is important to both developers and purchasers alike. The effective date of an SPA takes place on the day one party signs the SPA and subsequently performs their obligations under the SPA. It does not matter that the SPA was not signed by the other party, as long as both parties elected to be bound by the agreement.

 

More often than not, purchasers sign a sales form as an indicative of their intention to purchase a property from the developer. Whether or not a sales form prevails over the terms in the SPA, it depends on the actions taken by both the purchaser and developer, as well as the terms of the sales form. In this case, the SPA prevailed over the sales form as the purchaser had acted in a manner that is consistent with a party who is willing to perform under the SPA and clause (i) of the sales form stated that the SPA prevails over the sales form in the event of any inconsistency.


28 March 2024

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