In Kaisar Maxim Sdn Bhd v Cheah Poh Hin [2021] 8 AMR 379, the High Court allowed an appeal against the decision of the Sessions Court and held that the contravention of a provision in Schedule H (‘Schedule H Agreement’) of the Housing Developers (Control and Licensing) Regulations 1989 (‘the Regulations’) does not render the entire agreement void ab initio, but only renders the impugned provision to be unlawful.
 
Facts
 
The respondent and the appellant (a housing developer), entered into a sale and purchase agreement on 31 December 2019 (‘the SPA’) wherein the respondent purchased a housing accommodation from the appellant.
 
Clause 25(1) of the SPA provides, inter alia, that vacant possession of the parcel shall be delivered to the respondent within 54 months from the date of the SPA. However, clause 25(1) of the Schedule H Agreement provides that vacant possession of a parcel shall be delivered to the purchaser within 36 months from the date of the agreement. The Sessions Court Judge was of the view that any extension of the 36-months period stated in the Schedule H Agreement may only be granted with approval of the Minister under section 24 of the Housing Development (Control and Licensing) Act 1966 (‘the Act’), and that as the decision by the Controller of Housing (‘Controller’) or by an officer delegated by the Controller was ultra vires, the whole SPA was void ab initio by reason of the contravention of the Act.
 
The learned Sessions Court Judge accepted the respondent’s contention that the Federal Court in Ang Ming Lee & 34 Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor (and 5 Other Appeals) [2020] 1 MLJ 281 (‘Ang Ming Lee’) had decided that a provision in an agreement which contravenes the provisions of the Act renders the agreement to be void ab initio. Accordingly, the Sessions Court ordered the appellant to refund the monies paid by the respondent under the SPA.
 
The appellant appealed the decision of the Sessions Court Judge.
 
The decision of the High Court
 
Mohd Arief Emran JC agreed with the finding of the Sessions Court Judge that the SPA contravened the Act and the decision to grant the extension of time in the present case was ultra vires as found by the Federal Court in Ang Ming Lee.
 
However, the learned Judicial Commissioner added that this does not mean that the whole agreement is void ab initio and that section 24 of the Contracts Act 1950 is applicable in the case appealed. In the opinion of the Judicial Commissioner, it is first necessary to analyse the implication of any act of illegality that may appear in an agreement. The learned Judicial Commissioner cited The Co-operative Central Bank Ltd v Feyen Development Sdn Bhd [1995] 3 AMR 2751 where Edgar Joseph Jnr FCJ stated as follows:
 
‘Nevertheless, the general rule is that a contract, the making of which is prohibited by statute expressly or by implication, and which stipulates for penalties for those entering into it, shall be void and unenforceable, unless the statute itself saves the contract or there are contrary intentions which can reasonably be read from the language of the statute itself. (See Holman v Johnson [1775] 98 ER 1120 at 1121; Chung Khiaw Bank Ltd v Hotel Rasa Sayang Sdn Bhd & Anor [1990] 1 MLJ 356; [1990] 1 CLJ 675.) However, the general rule is subject to exceptions and, at the end of the day, it is a question of construction of the particular statute ... (Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd [1978] 139 CLR 410).’
 
The High Court then went on to consider whether a breach of the Act renders the SPA void and unenforceable.
 
After considering section 23A of the Act and Regulations 11 and 13 of the Regulations, the Court was of the view that the contravention of the Schedule H Agreement did not render the whole SPA void and unenforceable. In the learned Justice’s opinion, Parliament intended that any sale and purchase agreements entered under the Act must comply with the strict time frame of 36 months. However, Parliament did not expressly provide that a contravention of the Act would render the agreement void. In His Lordship’s view, a failure to comply with the aforesaid requirement will attract penalties under regulation 13 of the Regulations and render that part of the clause unlawful; and the purchasers will be entitled to insist the developers deliver the properties purchased within the 36 months provided by the Regulations.
 
Mohd Arief Emran JC referred to the Court of Appeal’s decision in Loh Tina & 6 Ors v Kemuning Setia Sdn Bhd & 5 Ors (and Another Appeal) [2020] 7 CLJ 720 (‘Loh Tina’) where the question arose as to whether the grant of a lease over a property instead of the sale of the said property with a housing accommodation erected thereon under a sale and purchase agreement that did not comply with Schedule G of the Regulations is null and void. In this case, Lee Swee Seng JCA held that there is no provision in the Act or the Regulations that declared an agreement not in compliance with Schedule G is null and void.
 
In Loh Tina, Lee Swee Seng JCA added that the intention of Parliament was to ensure that the purchasers receive what is provided for in the Act and the Regulations, that is for the housing accommodation and the land on which it has been built been sold and transferred to them and registered in their names. The learned Court of Appeal Judge added that there is much wisdom in not so declaring for the purchasers having paid the full purchase price would deserve to have the housing accommodation and the land transferred to them and registered in their names, and not merely obtain a lease of 99 years plus another 99 years.
 
The High Court did not agree with the respondent’s interpretation of the decision in Ang Ming Lee. In the opinion of the learned Judicial Commissioner, the Federal Court in Ang Ming Lee only held that the extension of time provided by the Controller to be ultra vires and did not go on to find that the whole sale and purchase agreement to be void. Thus section 24 of the Contracts Act 1950 will be inapplicable, and the purchaser will be entitled to the rights that have been afforded protection under the Act.
 
His Lordship found that the learned Sessions Court Judge had erred in law in declaring the entire SPA is void and that the error should be corrected by the appeal court. Accordingly, the High Court set aside the orders issued by the Sessions Court and declared the SPA to be valid and enforceable, subject to the condition that the delivery period under clause 25 of the SPA must adhere to the 36 months’ time frame provided in the Schedule H Agreement.
 
Comments
 
The High Court in this case has taken the position that the Federal Court in Ang Ming Lee did not decide that a sale and purchase agreement which contravenes the Schedule H Agreement is null and void entirely. Rather, this case determines that such contravention only renders the impugned clause to be unenforceable, and, subject to the appropriate relief being pleaded, empowers the Court to issue orders to ensure that the impugned provision conforms with the relevant provision of the Schedule H Agreement.
 
An interesting question that arises is whether a purchaser who has previously purchased a housing accommodation that is subject to the Act, and has taken delivery of the property will be entitled to retrospectively claim damages for late delivery if the sale and purchase agreement had provided for a delivery period of more than 36 months in contravention of the Act.
 
Case summary by Jesy Ooi (Partner) of the Real Estate Practice of Skrine.