Introduction

In November 2019, when Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 MLJ 281 (“Ang Ming Lee”) was first delivered by the apex court, the decision caused ripples in the housing industry. The decision of the Federal Court effectively nullified and rendered void earlier decisions of the Controller of Housing in granting an extension of time to housing developers pursuant to Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 (“HDR”). The Federal Court in Ang Ming Lee, having ruled that Regulation 11(3) of the HDR was ultra vires, did not address or discuss the issue of whether such a ruling would be applied prospectively. In the absence of a ruling that the decision in Ang Ming Lee would apply prospectively, the default position is that Ang Ming Lee would apply retrospectively.

The decision of Ang Ming Lee led to a surge of claims filed by purchasers against developers for late delivery of vacant possession for sale of property as far back as 2012.

The decision of Ang Ming Lee also triggered a series of conflicting decisions in the lower courts. As each case presents a different set of facts to be determined by the courts, some courts sought to distinguish Ang Ming Lee, while others adhered strictly to the principles in Ang Ming Lee. Despite compliance with the laws at that time, developers were faced with multiple claims for liquidated damages for late delivery of vacant possession.

The retrospective application of Ang Ming Lee left developers feeling unjustified and without recourse to defend themselves against lawsuits from purchasers as they were held liable for late delivery of vacant possessions.

Approximately five years later, on 26 July 2024, the Federal Court addressed the ramifications of Ang Ming Lee in the case of Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd and other appeals [2024] 5 MLJ 897 (“Obata-Ambak”). The apex court’s decision in Obata-Ambak finally put to rest the legal turmoil for the past five years.

In Obata-Ambak, the Federal Court considered the four main issues:

    1. Whether the cause of action for the late delivery liquidated damages shall accrue to the purchaser only upon expiry of three-year period as provided in a Schedule H agreement?
    2. Whether the Second Actor Theory would be applicable to the approval of the extension of time by the Controller of Housing?
    3. Whether Ang Ming Lee would apply prospectively?
    4. Whether the purchasers are not entitled to the claim for liquidated ascertained damages due to inequitable conduct?

Limitation Period

The Federal Court held that the purchasers were effectively challenging the validity of the clauses in the sale and purchase agreements as they have agreed to the terms when they signed the sale and purchase agreements in 2012.The developer in that instance, has obtained an approval to extend the time period for delivery of vacant possession before the sale and purchase agreements were executed. The purchasers were fully aware of the extended time period for delivery of vacant possession. Upon analysing the law on limitation, the Federal Court found that time begins to run at the earliest point i.e. at the signing of the sale and purchase agreements. The claim for liquidated ascertained damages that was filed outside of six years is thus time barred and the claim for liquidated ascertained damages must necessarily fail.

The Second Actor Theory

The apex court held that the Second Actor Theory is applicable to curb the negative repercussions that were caused by the decision in Ang Ming Lee. The Second Actor Theory states that a legally defective act does not necessarily result in the act having no legal effect at all. The Second Actor Theory would apply where an innocent party had relied on an earlier decision made by a public authority that was subsequently declared ultra vires.

Applying it to the current scenario, the first act was the approval of the extension of time by the Controller of Housing while the second act was the developer’s reliance on the approval. As there would be substantial injustice if the developer’s reliance is found to be void, the Federal Court held that the Second Actor Theory applies.

Prospectivity of Ang Ming Lee

The Federal Court having ruled in Ang Ming Lee that Regulation 11(3) of the HDR was ultra vires, did not clarify whether the decision would apply prospectively or whether all extensions granted before Ang Ming Lee were invalid.

In Obata-Ambak, the Federal Court clarified that if Ang Ming Lee was to have retrospective effect, this would have serious ramifications to the housing developers who had placed reliance on the existing laws and complied with the laws which were at that time valid. Therefore, the Federal Court held that the decision of Ang Ming Lee should apply prospectively and would not apply to extensions granted by the Controller of Housing before Ang Ming Lee.

Unjust Enrichment

On the factual matrix of the appeals, the Federal Court found that when the purchasers signed the sale and purchase agreements, they were fully aware of the terms of the sale and purchase agreements and the extended period to deliver vacant possession. The purchasers did not object to the extension and had benefited as vacant possession has been delivered. It was only after Ang Ming Lee that the claims were filed years after vacant possession was delivered.

The Federal Court held that the purchasers are thus not entitled to the claim for liquidated ascertained damages due to inequitable conduct of unconscionability, unjust enrichment and estoppel. The Federal Court emphasised that Ang Ming Lee is not a carte blanche for purchasers to claim liquidated ascertained damages retrospectively to enjoy a financial windfall.

The Aftermath of Obata-Ambak

In a recent decision of the High Court in Mazmimala bt Mashur & Ors v Symphony Hills Sdn Bhd [2024] MLJU 2709, the High Court of Shah Alam on 21 October 2024 dismissed a claim for liquidated ascertained damages by purchasers pursuant to an Order 14A application.

In this action, 48 purchasers claimed against Symphony Hills Sdn Bhd for liquidated ascertained damages pursuant to Ang Ming Lee. The sale and purchase agreement between the purchasers and the developer stipulated that vacant possession would be delivered within 36 months. Prior to the execution of the sale and purchase agreements, the developer obtained an extension of time to extend the time period for delivery of vacant possession by 12 months. The properties involved in this case were landed properties, governed by Schedule G, which stipulates a time period for delivery of vacant possession of 24 months.

The High Court categorised the legal issues into 4 categories:

    1. Validity of extension of time;
    2. Justification for extension of time;
    3. Estoppel; and
    4. Mode of challenge.

The High Court followed the principles established by the Federal Court in Obata-Ambak and found that the extension of time, which was granted before Ang Ming Lee, is not ultra vires of the Housing Development (Control and Licensing) Act 1966.

The High Court further held that in the absence of any order of court in direct proceedings against the relevant parties on the invalidity of the approval granted by the Controller of Housing, the approval granted by the Controller of Housing is valid and was made in accordance with the law and procedures at that material time. The High Court did not answer the remaining 2 categories as these would have no effect on the determination of the earlier categories. The Plaintiffs’ claim was subsequently dismissed with cost of RM42,000 awarded to the Defendant.

Our senior partner and head of litigation, Mr Leonard Yeoh, senior associate, Caleb Sio and associate, Chen Mei Yan, represented the developer at the High Court.

With the decision of Obata-Ambak, purchasers who purchased their property before November 2019 may no longer leverage on the decision of Obata-Ambak to claim for liquidated ascertained damages. For developers and purchasers, it is important to stay updated on the current position of law and any regulatory changes to ensure that your rights remain protected.

Authors : Partner, Mr Leonard Yeoh and Senior Associate, Mr Caleb Sio.

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