Federal Court’s Ruling In the Country Garden Danga Bay Case

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The Federal Court in the case of Country Garden Danga Bay Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor [2022] 5 CLJ 173 held that the Tribunal is precluded from enforcing terms which were not found in the statutory sale and purchase agreement. The Apex Court had also further held that the homebuyer’s conduct in accepting vacant possession and subsequently renovating the unit amounts to an estoppel by conduct.

This article discusses the Federal Court’s decision in this case.

Facts

The developer had entered into a sale and purchase agreement (SPA) with the homebuyer for the sale and purchase of a unit of an apartment in the Country Garden Danga Bay’s project (the Project). Upon completion of the construction of the Project, a notice of delivery of vacant possession was issued to the homebuyer. After taking vacant possession of the unit, the homebuyer proceeded to renovate the unit. Subsequently, the homebuyer commenced a claim against the developer in the Tribunal for Homebuyer Claims (the Tribunal) alleging that the Developer had given the homebuyer the wrong unit.

The homebuyer in bringing a claim against the Developer had claimed that the unit he had received was not in accordance with the terms of the SPA. More specifically, the homebuyer was given a unit with an open balcony, whereas in fact, he was entitled to a covered balcony as featured in the display model.

The Tribunal’s Decision

The Tribunal ordered for a technical inspection report to be conducted. The report found that the unit delivered to the homebuyer was in compliance with the specifications in the SPA. Notwithstanding the report, the Tribunal allowed the homebuyer’s claim as they found that there were unauthorised changes to the specifications in the original SPA which had caused losses to the homebuyer. The Tribunal gave a ruling to amend the specifications of the SPA pursuant to Section 16Y(2)(e) of the Housing Development (Control and Licensing) Act 1966 (HDA 1966), entitling the homebuyer to a unit with a covered balcony as featured in the display model.

The High Court And Court Of Appeal’s Decision

On appeal, both the High Court and Court of Appeal upheld the decision of the Tribunal.

The Federal Court’s Decision

The main issues that arose before the Federal Court are,

(i) Whether Section 16N(2) of the HDA 1966 precludes the Tribunal from exercising jurisdiction over a claim which is not based upon an express term in the SPA or it’s specifications, but based on the homebuyer’s expectation of the unit purchased?

(ii) Whether the Tribunal, under Section 16Y(2)(e) of the HDA 1966 is conferred the power to ‘vary or set aside’ the contract and add specifications of its own to the SPA?

(iii) Whether the homebuyer’s action against the developer is maintainable despite having accepted vacant possession of the unit and thereafter renovating the unit?

Section 16N(2) Of The HDA 1966

Section 16N(2) provides that “the jurisdiction of the Tribunal shall be limited to a claim on a cause of action arising from the SPA entered into between the homebuyer and the housing developer…”.

The homebuyer had in his claim, alleged that he was given the wrong unit, namely a unit with an open balcony. He claimed that he was entitled to a unit with a covered balcony. However, based on the technical inspection report on the unit, which was ordered by the Tribunal, the Federal Court concluded that the report indicated that the unit was delivered in compliance with the SPA.

It was stated in the technical report that:

“Tiada cadangan teknikal kerana pelan unit rumah yang diserahkan oleh pemaju sama sepertimana pelan dalam perjanjian jual beli dan pelan yang diluluskan oleh pihak berkuasa tempatan.”

Based on the technical inspection report, the Federal Court concluded that the Tribunal’s award in favour of the homebuyer was against the provision of the SPA and contradicted the findings in the technical inspection report.

The Tribunal, being a creature of statute, can only act within the four walls of the statute. Based on Section 16N(2), the Tribunal’s jurisdiction is only limited to the terms in the SPA, it does not include any purported agreement or conduct outside the SPA (Southville City Sdn Bhd v Chua Teck Kee & Anor (No. 2) [2019] 1 LNS 1318).

Section 16Y(2)(e) Of The HDA 1966

Section 16Y(2)(e) states as follows:

“An award of the Tribunal under subsection (1) may require one or more of the following:

(e)that the contract be varied or set aside, wholly or in part”

This section is a power of rectification, allowing the Tribunal to vary or set aside the SPA to ensure that it complies with the statutory terms provided in the Schedule of the HDA 1966. According to the Federal Court, this power may only be exercised by the Tribunal in situations where there is inconsistency with Schedule H of the Housing Development (Control and Licensing) Regulations 1989 i.e. the statutory SPA.

In this case, the Federal Court took the view that the Tribunal had acted beyond its jurisdiction by taking into consideration the homebuyer’s allegation that the unit he had purchased came with a covered balcony – this is a matter that fell outside the SPA in the form of collateral contracts, representations or warranties, which the Tribunal does not have jurisdiction over.

Therefore, based Sections 16N(2) and 16Y(2)(e), the Federal Court found that the Tribunal did not have the jurisdiction to entertain the homebuyer’s complaint that the unit he had purchased was supposed to come with a covered balcony – which was not based on the SPA.

Homebuyer’s Acceptance Of Vacant Possession And Subsequent Renovation

In addition to the jurisdictional issue, the Federal Court held that the homebuyer’s conduct of accepting vacant possession after inspection, and subsequently renovating the unit amounted to estoppel by conduct. Thus, the homebuyer is estopped from making a claim against the developer.

When the homebuyer signed and accepted vacant possession of the said unit and exercised his right to ownership by renovating the unit, the homebuyer is estopped from claiming that he was given the wrong unit.

Furthermore, the Federal Court found that, at the point of delivery of vacant possession of the unit, the homebuyer would have noticed that the unit delivered did not carry a covered balcony. Yet, he had accepted the unit and carried on with renovation on the unit. At that point, the homebuyer had affirmed the contract as it stood on its terms which did not have a term for a covered balcony. A reasonable purchaser would have at that point, rejected the property at the outset and exerted his rights.

Based on the above reasons, the Federal Court found that the Tribunal’s decision was irrational and unreasonable and allowed the developer’s appeal.

Conclusion

The Federal Court’s decision in the Country Garden Danga Bay case highlights the significance of a homebuyer in accepting vacant possession of the unit. A homebuyer should properly inspect the unit received prior to signing and accepting deliver of vacant possession of the unit, let alone continue renovating the unit, as it may amount to an estoppel by conduct on the part of the homebuyer, preventing the homebuyer from making a claim against the developer.

Secondly, this case clearly states that the Tribunal’s jurisdiction, being a creature of statute, is confined to the provisions in Sections 16M and 16N of the HDA 1966. Section 16N(2) limits the Tribunal’s power to only entertaining claims, based on a cause of acting arising from a statutory sale and purchase agreement. Terms that are not found in the sale and purchase agreement are beyond the jurisdiction of the Tribunal. Hence, any decision of the Tribunal that goes beyond the stipulated powers is irrational, unreasonable and tainted with illegality.

The Federal Court’s decision on this issue has been echoed in the cases of Aspen Vision City Sdn Bhd v Tribunal Tuntutan Pembeli Rumah, Kementerian Perumahan dan Kerajaan Tempatan & Anor [2022] 1 LNS 1566, and Zubicon Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor [2022] 1 LNS 1347.

It is suggested that the homebuyer’s recourse is to bring an action against the developer for misrepresentation and breach of contract.

Authored by Khoo Jia Hui, a Senior Associate with the firm’s Real Estate Transaction and Tax, SST and Customs practice.

7 February 2023