24 August 2021
Malaysia

Earlier this year, the Federal Court’s decision in PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and other appeals [2021] 2 MLJ 60 (“PJD Regency”) brought celebratory news to home buyers but left developers on the brink of dismay.

In this landmark decision, the Federal Court reemphasised that the Housing Development (Control and Licensing) Act 1966 (“HDA”) and its subsidiary legislation i.e., the Housing Development (Control and Licensing) Regulations 1989 were social legislation, intended to safeguard home buyers.

To accord such safeguards, the Federal Court ruled that the calculation of liquidated and ascertained damages (“LAD”) would begin from the date of payment of booking fees and not the date contained in the Sales and Purchase Agreement (“SPA”). The Federal Court also unequivocally held that the collection of booking fees is prohibited, upon scrutiny of the HDA’s legislative intention. This article aims to provide an understanding on what constitutes a “social legislation”, recent developments following from PJD Regency and commentary on moving forward.

What is a social legislation?

In PJD Regency, the Federal Court defines “social legislation” as “a legal term for a specific set of laws passed by the legislature for the purpose of regulating the relationship between a weaker class of persons and a stronger class of persons”.[1]

The law recognised that there would exist unequal bargaining of power in the governance of contractual relationships between parties. The inequality, which the law aims to reduce, can be seen in the relationship between a home buyer and a developer under the HDA, or between an employer and employee under the Industrial Relations Act 1967.[2]

Our Strata Management Act 2013 and Strata Titles Act 1985 are also recognised as social legislation, intended to safeguard strata property owners and regularise the proper maintenance of buildings.[3] In the United Kingdom, the Public Health Act 1936[4] and National Minimum Wage Act 1998[5] respectively have been established as social legislation whereas the factor on unequal bargaining power was considered when legislating the Unfair Contract Terms Act 1977.[6]

How do we reconcile a purposive interpretation for social legislation against the strict statutory interpretation?

The Federal Court in PJD Regency held that the interpretation of a social legislation must be made in a liberal, or rather purposive approach; an approach taken similarly by the courts in the United Kingdom.[7] This interpretation is well settled, where the Federal Court in a matter relating to employment law, cited Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor [1995] 3 MLJ 369:

Now, it is well settled that the Act is a piece of beneficent social legislation by which Parliament intends the prevention and speedy resolution of disputes between employers and their workmen. In accordance with well settled canons of construction, such legislation must receive a liberal and not a restricted or rigid interpretation.[8] (emphasis added)

However, this begs the question as to why one should adopt the purposive approach if the terms in the statute are clear and unambiguous.

In answering this, the Federal Court in PJD Regency provided a guideline:

[36] From the above, we would summarise the principles on the interpretation of social legislation as follows:

  1. Statutory interpretation usually begins with the literal rule. However, and without being too prescriptive, where the provision under construction is ambiguous, the Courts will determine the meaning of the provision by resorting to other methods of construction foremost of which is the purposive rule (see the judgment of this Court in All Malayan Estates Staff Union v Rajasegaran & Ors [2006] 6 MLJ 97).
  2. The literal rule is automatically displaced by the purposive rule when it concerns the interpretation of the protective language of social legislation.
  3. For the avoidance of doubt, it is important to emphasise that even where a term or provision of a social legislation or a statutory contract enacted thereunder is literally clear or unambiguous, the Court no less shoulders the obligation to ensure that the said term or provision is interpreted in a way which ensures maximum protection of the class in whose favour the social legislation was enacted. (emphasis added)

Therefore, where the statute involved is a social legislation, it is not a question on which rule to apply. The literal rule would be upheld to ensure maximum protection to the class the statute aims to safeguard. In construing the purposive approach, the Federal Court in PJD Regency revisited the Hansard of the 3rd Reading of the Housing Development (Control and Licensing) Bill on 25 March 1966, and cited the words of Khaw Kai Boh, the then Minister of Local Government and Housing: “legislative measures should be taken to protect the people from bogus and or unscrupulous housing developers. Hence this Bill”.

Nonetheless, the Federal Court held that although a social legislation would always be upheld, this does not mean that the court is rewriting the agreement or bargain between parties. Instead, the courts are construing the agreement in accordance with the statutory protections afforded by Parliament.[9]

Moving Forward

The impact of this judgement to date, is reflected in subsequent High Court judgements,[10] where they are bound to follow the decision in PJD Regency due to the doctrine of stare decisis.

In Leong Keng Chiang v Prema Bonanza Sdn Bhd [2021] MLJU 714, the High Court went to the extent of stating that there can therefore be no question of unjust enrichment upon a purchaser’s right to enforce his statutory remedy against the housing developer.[11]

This position remains until and unless the decision in PJD Regency is challenged again. Unsurprisingly, the guidelines propounded above are reiterated in subsequent industrial relation cases, reemphasising the Industrial Relations Act 1967 as a social legislation.[12]

In our perspective, the area of social legislation is indeed complex. It involves competing interests and policies of different stakeholders. Developers on one end, have argued that the collection of booking fees serve as a grant of right of option to purchase the property and to ease persuasion of bridging financiers where some allegedly require assurance of sales margin.[13]

The Federal Court in PJD Regency commenced its finding by enunciating the legislative intent to prohibit the collection of booking fees under the rationale that the HDA is a social legislation. The court concluded by addressing this rampant practice with regards to the calculation of LAD.

In moving to protect home buyers, the Federal Court provided a solution whereby if there is late delivery, then calculation of LAD would start from the date of collection of booking fees. Housing developers would then be minded to ensure that the construction and resulting delivery of vacant possession to the buyer are completed within the prescribed timeframes in the statutory sale and purchase contracts under the HDA. By equating the date of collection of booking fees to the date the sale and purchase agreement starts to run, this essentially brought an end to the practice of collecting booking fees.

On the other hand, the collection of booking fees in the United Kingdom (termed as ‘reservation fees’) forms part of the pre-purchase information under their Consumer Code for Home Builders. The Code provides a proper regime with a written reservation agreement, how and when the same would end and the amount of reservation fees payable.[14] Their Housing Act 1988 also recognises the need to protect occupiers from unconscionable and unreasonable housing schemes, providing a regime which is the result of considered legislative choices in balancing competing social imperatives.[15]

There is no doubt that there is a need to safeguard the rights of home buyers. However, the PJD Regency decision is akin to imposing a sudden prohibition without proper alternatives accorded to developers. As the HDA gains more recognition as a social legislation, a proper legislative regime and its implementation should be put in place to balance the scale of justice for both home buyers and developers.

If you have any questions or require any additional information, please contact Jeyakuhan S K Jeyasingam or the Zaid Ibrahim & Co. partner you usually deal with. This article was prepared with the assistance of Sahira Binti Sha’ari of Zaid Ibrahim & Co.


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

[1] PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and other appeals [2021] 2 MLJ 60 (FC) [31].

[2] Hoh Kiang Ngan v Mahkamah Perusahaan Malaysia & Anor [1995] 3 MLJ 369 (FC) 387.

[3] Sodalite Sdn Bhd & Ors v 1 Mont’ Kiara dan Kiara 2 Management Corporation & Ors [2021] MLJU 806 (HC) [28].

[4] Manolete Partners plc v Hastings Borough Council [2014] 1 WLR 4030 (CA) [53].

[5] Revenue and Customs Commissioners (appellant) v Ant Marketing Ltd (respondent) [2020] IRLR 744 (Employment Appeal Tribunal) [39].

[6] Uber BV and others (appellants) v Aslam and others (respondents) [2021] IRLR 407 (SC) [68].

[7] Supra, note 5 [39].

[8] Supra, note 2, 387.

[9] Supra, note 1 [37].

[10] Ong Saut Mee & Ors v Gasing Meridian Sdn Bhd [2021] 5 CLJ 249 (HC) [65] and Low Cheng Seong & Anor v Ceria Development Sdn Bhd (dahulu dikenali sebagai Nusmetro City Sdn Bhd) [2021] MLJU 1036 (HC) [13].

[11] Leong Keng Chiang v Prema Bonanza Sdn Bhd [2021] 1 LNS 659 (HC) [68].

[12] Crystal Crown Hotel & Resort Sdn Bhd (Crystal Crown Hotel Petaling Jaya) v Kesatuan Kebangsaan Pekerja-Pekerja Hotel, Bar & Restoran Semenanjung Malaysia [2021] 3 MLJ 466 (FC) [49]. See also Gasing Potensi Construction Sdn Bhd v Abdul Hakim bin Jaapar & Anor [2021] 1 LNS 593 (HC) [52].

[13] V. Anbalagan, ‘Crack down on booking fee scam, say house buyers’, Free Malaysia Today (22 January 2021) <Link here>.

[14] Clause 2.6 at page 10 of the Consumer Code Requirements and Good Practice Guidance for Home Builders (4th Edn, June 2019).

[15] Kay and others v Lambeth London Borough Council [2006] 2 AC 465 (HL) 475, see the Housing Act 1988, Part I, Chapter II.