4 March 2022
Malaysia

In November 2020, the Federal Court (“FC”) in Ang Ming Lee & ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 MLJ 281 (“Ang Ming Lee”) decided that regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 (“HDR”), conferring power on the Controller of Housing (“Controller”) to waive or modify any provision in the sale and purchase agreement (“SPA”) prescribed by the Housing Development (Control and Licensing) Act 1966 (“HDA”), was ultra vires the HDA.

Regulation 11(3) of the HDR reads as follow:

Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive or modify such provisions:

Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the Controller.

Ang Ming Lee was a landmark case that set the precedent on how to deal with the issues on modification of the terms of the SPA prescribed by the HDA and the extension of time for delivery of vacant possession (“EOT”).

Nonetheless, the recent case of Bludream City Development Sdn Bhd v Alvin Leong Wai Kuan & 14 ors (Civil Appeal No. B-01(A)-55-01/2020) (“Bludream City”) appears to further interpret the decision in Ang Ming Lee. In this case, the appellant, a housing developer (“Developer”), had applied to the Controller for a six-month EOT from the statutorily prescribed contractual period of 36 months from the date of signing of the SPA to 42 months (“1st EOT”) which was granted by the Controller prior to the signing of the SPA. This 1st EOT was not the subject of the challenge by the Respondent who were a group of purchasers of the project (“Purchasers”). During the construction period, the Developer then applied for a second extension (“2nd EOT”) due to issuance of stop work order by relevant authorities for 17 months (“SWO”) which halted the construction of the project. However, the Controller only allowed a partial 2nd EOT for 12 months for the existing unsold units. In respect of the sold units, the condition for a 12-month extension was the requirement that the Developer enter into a supplementary agreement with the Purchasers.

The Purchasers did not agree to enter into a supplementary agreement to allow the 2nd EOT, the Developer being an aggrieved party appealed to the Minister of Urban Wellbeing, Housing and Local Government (“Minister”). After taking into account all relevant considerations including the cause of the SWO, the Minister himself had signed the letter of EOT to extend the time for the Developer to complete the project. The Purchasers then contested the decision of Minister to grant the 2nd EOT by way of a judicial review application (“JR application”).

The High Court (“HC”), relying on Ang Ming Lee, allowed the JR application and declared that the 2nd EOT granted by the Minister was illegal and unenforceable. The Developer appealed to set aside the HC’s decision. The Court of Appeal (“COA”) allowed the appeal and in distinguishing Ang Ming Lee with the current case went on to state their interpretation of the FC decision in Ang Ming Lee.

Distinguishing Bludream City with Ang Ming Lee

The COA remarked that the difference in the JR application between Bludream City and Ang Ming Lee, was that in Ang Ming Lee it was the Controller who granted the EOT while in Bludream City, it was the Minister himself who granted and signed the 2nd EOT.

COA further remarked that the FC in Ang Ming Lee did not rule that the Minister has no power to vary or modify the SPA prescribed by the HDA. Rather, the court ruled that the Minister cannot delegate the power to vary and modify the SPA prescribed by the HDA to the Controller. Hence, the FC ruling in Ang Ming Lee cannot be construed and stretched to mean that since regulation 11(3) of the HDR is ultra vires, even the Minister himself cannot exercise the power to grant extensions. The COA further remarked that the Minister could not lose the power he validly possesses by delegating the power to the Controller. Even if the Regulation delegating the power was deemed to be ultra vires, the Minister still retains the power to grant the extensions.

Powers of Minister conferred by the Parliament

The COA in Bludream City highlighted that Parliament had granted powers to Minister to “regulate and prohibit the conditions and terms of any contract between a licensed housing developer, his agent or nominee and his purchaser”. Section 24(2)(e) of the HDA  reads as follows:

(1) Subject to this section, the Minister may make regulations for the purpose of carrying into effect the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, the regulations may:

                …

(e) regulate and prohibit the conditions and terms of any contract between a licensed housing developer, his agent or nominee and his purchaser;

The COA was of the view that the expression “regulate and prohibit” in section 24(2)(e) is broad enough to include “waive and modify” any provisions under regulation 11(3) of the HDR, including the time period to complete the project.

Hence, although regulation 11(3) of HDR is ultra vires as per Ang Ming Lee, section 24(2)(e) of the HDA grants the Minister the power to regulate and prohibit the terms and conditions of the contract of sale. Thus, the Minister could grant an extension of time on the ground of special circumstances

Furthermore, the FC in Ang Ming Lee, ruled that the Minister ought to apply his own mind to the matter of extension of time for the developer to complete the project and not delegate that responsibility to the Controller. This goes to show that the FC agreed that the Minister has such powers to exercise but must make the decision and grant the extension himself.

The vast power of Minister as conferred by Parliament also extends to powers to give directions under sections 11 and 12 of the HDA to safeguard the interests of the purchasers where the developer is unable to meet its obligations.

In exercising his powers provided under the HDA, the Minister in Bludream City had applied his own mind and taken all relevant factors into consideration including the cause of the issuance of SWO. Based on the expert report, the subsidence and crack in the nearby school was not because of the work done by the Developer and the SWO was eventually lifted. The delay in completion of the project was beyond the Developer’s control and this is a case of a genuine need for the extension of time corresponding to the period of delay caused by the SWO.

Commentary

The decision in Bludream City highlights that discussions regarding EOTs and modifications of scheduled SPAs continue to evolve, even with FC’s decision in Ang Ming Lee.

Parliament conferred vast powers to the Minister so that he may be flexible in performing his duties. However, the Minister must apply his own mind when exercising such powers by taking into consideration the relevant circumstances.

It is interesting to note that the Purchasers have filed leave to appeal the COA’s decision. To resolve this matter and remove all ambiguity for all parties concerned, a decision by the FC would be needed.

For a comparison between Ang Ming Lee and Bludream City, please see here.

If you have any questions or require any additional information, please contact Nurulartiah Haris, or the Zaid Ibrahim & Co. (a member of ZICO Law) partner you usually deal with. This article was prepared with the assistance of Sara Jane Jayamana of Zaid Ibrahim & Co.


This alert is for general information only and is not a substitute for legal advice.