This alert discusses the recent Court of Appeal ruling in Chrishanthini Angela Regina Sebastiampillai v View Esteem Sdn Bhd [2023] 1 MLJ 309 on the defect liability clause.
Brief Facts
A sale and purchase agreement (SPA) in the statutory form as provided under the law was executed between by the Chrishanthini Angela Regina Sebastiampillai (the Appellant) and View Esteem Sdn Bhd (the Respondent). On 3.9.2012, the Respondent notified the Appellant that the vacant possession of the premise will be deemed delivered upon the expiry of 14 days from the date of the letter. The Appellant collected the keys to the premise on 24.10.2012.
During the collection of keys, the Appellant claimed that many defects were found. Despite the Respondent retaining a set of keys for rectification work purpose, the defects were not rectified and there was fresh damage caused. Subsequently, new defects were apparent after the keys were returned to the Appellant. Despite being notified by the Appellant, no action was taken by the Respondent and as such, the Appellant filed a suit against the Respondent seeking for certain relief.
The Appellant’s Submission
The Appellant emphasised that clause 29 of the SPA provided a purchaser with an entitlement to claim for the cost of repairing the defects. It cannot be interpreted as to bar, limit a purchaser’s common law right to pursue a claim against the developer. The Appellant referred to both Pearce & High Ltd v. Baxter and Another [1999] 66 Con LR 110 and Raja Lob Sharuddin Raja Ahmad Terzali & Ors v Sri Seltra Sdn Bhd [2008] 2 MLJ 87; [2008] 2 CLJ 284; [2008] 2 AMR 357 , where the courts opined that the clause in relation to defect liability shall act as an additional remedy for the purchaser, without affecting the purchaser’s existing rights under the common law.
The Respondent’s Submission
The Respondent submitted that in view that the SPA was a statutory sales contract and hence, no departure can be done. Pursuant to clause 29 of the SPA, the Appellant’s claim shall be deemed premature as the condition laid under Clause 29 of the SPA was not satisfied.
As the 30-day notice had been given to the Respondent, Appellant shall carry out the rectification work and claim from the Respondent’s solicitor and further, to claim from the Respondent in the event where the amount exceeds the stakeholder sum, instead merely provide with a quotation.
Further to the above, pursuant to Clause 29(2) of the SPA, the Appellant failed to provide a 14-day notice to the Respondent as to provide the Respondent with further opportunity to rectify the defect.
Relying on SPM Membrane Switch Sdn Bhd v Kerajaan Negeri Selangor [2016] 1 MLJ 464; [2016] 1 CLJ 177 1, the Respondent submitted that the words in the SPA should be given its natural, ordinary meaning which ought to yield to business common sense. The Respondent further relied on Sentul Raya Sdn Bhd v Hariram Jayaram & Ors And Other Appeals [2008] 4 MLJ 852; [2008] 6 AMR 692, [2008] 4 CLJ 618 to contend that the statutory legislation superseded common law. Additionally, reference was also made to the book “Housing Development Law” (2017) by SY Kok that “no defect liability clause can function until and unless some procedural steps as stipulated therein been complied by an aggrieved purchaser”.
Finding Of The Court Of Appeal
The Court of Appeal held that clause 29 of the SPA worked as a mechanism to protect the purchaser, i.e. to ensure that defects which become apparent within 24 months after the delivery of vacant possession of a premise to be rectified instead of working as a bar to restrict the purchaser from exercising their common law rights. The court relied on Raja Lob Sharuddin Raja Ahmad Terzali & Ors v Sri Seltra Sdn Bhd[2008] 2 MLJ 87; [2008] 2 CLJ 284; [2008] 2 AMR 357 4, which emphasised that it was crucial to determine the purpose of the clause, i.e. whether it was to act as a mechanism to protect the purchasers or whether it was to be applied against the purchasers of houses. The court in Raja Lob made the ruling in line with the Privy Council opinion in City Investment Sdn Bhd v Koperasi Serbaguna Cuepacs Tanggungan Bhd [1988] 1 MLJ 69, which provided that the Housing Development (Control and Licensing) Act 1966 was introduced to improve and supplement the common law remedies and not to deprive the possible contractual remedy.
The court in disagreeing with the Respondent’s interpretation of clause 29 of the SPA, commented that:
“The respondent’s interpretation would mean that every purchaser who invokes cl 29 by giving the 30 days’ notice to rectify defects, has automatically given up its common law right and would only have a cause of action if they remedied the defects on their own. This would have the effect of the developer being relieved of its statutory obligation to rectify the defects. Such an interpretation cannot be tenable.”
In view of the above, the court emphasised that clause 29 should work as an additional protection to house buyers without affecting their existing rights under the common law. Depriving house buyers of their common law rights will be derogating from the intention of clause 29 of the SPA.
The appeal for the cost of rectification which amounted to RM 127,000.00 together with the cost of accommodation during the period of the rectification of 3 months, which came to RM9,270.00 was allowed. Further, the Court of Appeal awarded the Appellant with RM50,000.00 for general damages as the court agreed that the Appellant would have had the expectation that the premise would be suitable for occupation but the defects made that not possible which affected the Appellant’s family and health in addition to causing financial problem as well as the difficulty faced in finding a contractor.
Conclusion
The Court of Appeal ruled in favour of the Appellant after examining the intention of behind the introduction of clause 29 of the SPA under Housing Development (Control and Licensing) Act 1966 and Housing Development (Control and Licensing) Regulations 1989. Clearly, this clause cannot bar the common law claim for breach of contract. Hence, by invoking clause, it will not limit the right of a purchasers to pursue claim for a breach of contract. This interpretation is in line with intent of the housing legislations, which are social legislations passed by Parliament to protect home buyers.
20 September 2023