In Affan Bin Mohd Nawi & Ors v Lakefront Residence Sdn Bhd & Ors [2023] MLJU 1955, Lakefront Residence Sdn Bhd, the developer of a housing development known as Lakefront Villa @ Cyberjaya was compelled by the High Court to honour its promise made to the purchasers that the development would be a “gated and guarded development features just 110 exclusive luxury villas”.¹
 
In the above cited decision, the Learned Judicial Commissioner Leong Wai Hong also issued an injunction restraining the developer from developing part of the development land earmarked for construction of bungalow units into a commercial development.
 
Barely seven weeks later, the same developer was again required by the Court of Appeal in Lakefront Residence Sdn Bhd v Tribunal Tuntutan Pembeli Rumah and Wong Boon Leng [2023] 1 LNS 2146, to pay compensation for not honouring its promise to purchasers of units in a strata development known as Lakefront Residence @ Cyberjaya.
 
BRIEF FACTS
 
This time around, the story unfolds from the time when the purchasers entered into the sale and purchase agreements with the developer. The sale and purchase agreements were on the basis of the approved building layout plan dated 23 March 2012 (“SPAs Approved Building Plan”), which indicated and promised the installation of a centralised air conditioning system without having to install any outdoor compressors within the indoor area of their units (“Centralised Air Conditioning System”).
 
However, unilaterally and without the purchasers’ prior consent, the developer amended the SPAs Approved Building Plan with another plan dated 31 July 2018 in which the Centralised Air Conditioning System was removed and changed to a split unit air conditioning system (“Split Unit Air Conditioning System”).
 
As the units were originally designed with the intention to install the Centralised Air Conditioning System, their design did not include an outdoor ledge which is typically constructed for strata development for the installation of outdoor compressor of split unit air conditioning units.
 
Notwitstanding the change to a Split Unit Air Conditioning System, no construction or solutions were provided by the developer for the units to install the outdoor compressor. Instead, the developer installed the outdoor compressor unit in an indoor portion of the yard which was also the unit’s kitchen area as shown in the photographs below². Following the delivery of vacant possession of the units and during the defect liability period (“DLP”), the purchasers reported the installation of the Split Unit Air Conditioning System as a defect. The developer then convened a meeting with the Lakefront Residence Owner’s Association and subsequently issued a letter indicating that it was the developer’s decision to change the Centralised Air Conditioning System to the Split Unit Air Conditioning System and that the developer regrets that the change was not communicated earlier.
 
The developer proposed several options to the purchasers but there was no option to relocate the outdoor compressors outside the units’ indoor areas. The purchasers had no choice but to arrange a solution to relocate the outdoor compressors at their own costs. Thereafter, the purchasers filed their respective claims to recover the relocation costs at the Tribunal for Homebuyer Claims (“Tribunal”). The purchasers’ claims at the Tribunal was allowed.
 
DECISION OF THE HIGH COURT
 
Dissatisfied with the Tribunal’s decision, the developer applied to the High Court for a judicial review of the Tribunal’s decision. Upon hearing the submission of all parties, the learned judge dismissed all four of the developer’s judicial review applications on the following grounds: 

ISSUES BEFORE THE COURT OF APPEAL 
 
Again, dissatisfied with the High Court’s decision, the developer appealed to the Court of Appeal.
 
The Court of Appeal considered the following two (2) issues:
 
Issue 1   –   Whether or not the Learned Judge was right in finding that the Tribunal’s claims were not time barred; and
 
Issue 2  –   Whether or not the Learned Judge was right in finding that the Tribunal had not gone beyond its jurisdiction under Section 16N(2) of the Housing Development (Control and Licensing) Act 1966 (“HDA”).
 
Section 16N(2) of the HDA essentially provides that the Tribunal’s jurisdiction is limited to a claim that is based on a cause of action arising from the SPA which is brought by a homebuyer not later than twelve (12) months from: 

In other words, if a claim is being made after 12 months from the above dates, the Tribunal’s jurisdiction to hear the claim would be affected.
 
DECISION OF THE COURT OF APPEAL
 
Issue 1
 
On Issue 1, the Court of Appeal affirmed the High Court’s decision that the purchasers’ claims at the Tribunal were not time barred as the claims were initiated before the lapse of the DLP, falling within paragraph (b) of Section 16N(2) of the HDA.
 
The Court of Appeal did not agree with the developer that the installation of the outdoor compressors within the indoor area of the purchasers’ units was not a “defect” as the DLP clause had cast a wide net of matters which may fall within the ambit of the DLP, one of which was when “the said parcel or the said building … not having been constructed in accordance with the plans and description as specified” in the SPAs. It was also found that the installation of the outdoor compressors within the indoor area of the purchasers’ units was an infraction in that the building was “not constructed in accordance with the plans” of the SPAs and undoubtedly was a defect falling within the DLP clause. As the purchasers had reported the same within the DLP, the purchasers’ claims at the Tribunal were not time barred.
 
In coming to its decision, the Court of Appeal not only placed great emphasis on the fact that the developer had in its own letter clearly admitted that the initial promise was to install a Centralised Air Conditioning System and that the developer’s unilateral decision to abandon the Centralised Air Conditioning System was not communicated to and was never consented by the purchasers. The Court of Appeal also stressed the findings of the Tribunal’s independent report that reported the hazardous manner in which the outdoor compressors were installed indoors and were not installed in compliance with the safety specifications prescribed by the manufacturer. It was these factors that the Court of Appeal seemed to have placed considerable weight in finding that the hazardous indoor installation of the outdoor compressor was a defect falling within the ambit of the DLP clause of the SPAs.
 
Issue 2
 
On Issue 2, the Court of Appeal affirmed the High Court’s decision that the Tribunal had not exceeded its jurisdiction under Section 16N(2) of the HDA when it allowed the purchasers’ claims. The developer’s argument that the term for the installation of a centralised air conditioning system was not within the SPAs, but the Deed of Mutual Covenant, was not accepted as Court of Appeal found that the said term was undoubtedly a term within the SPA itself. The Court was of the opinion that even if the said term was only in the Deed of Mutual Covenant, the Deed of Mutual Covenant, which is commonly signed by purchasers together with the SPAs, may still be read into the SPAs as it can be considered to be one and the same transaction.
 
Having affirmed the High Court’s decision on both issues, the Court of Appeal dismissed the developer’s appeals.
 
COMMENTS
 
An issue which does not appear to be dealt with by the Court of Appeal is the developer’s contention that the matter of the installation of the outdoor compressors of the Split Unit Air Conditioning System which were free items that came together with the sales package for the units purchased by the purchasers was separate and distinct from the matter of installation of the Centralised Air Conditioning System within the building and the former was not a matter within the SPAs.
 
It is doubtful that the above argument would have found favour with the Court of Appeal as the approved building plan had indicated and promised a Centralised Air Conditioning System would be installed and the developer’s unilateral decision to change to a Split Unit Air Conditioning System was a deviation from the approved building plan that had resulted in relocation costs being incurred by the purchasers.
 
By upholding the High Court’s decision that essentially allowed the purchasers to be compensated for the developer’s non-compliance with the specifications in the SPAs, the Court of Appeal continues the trend of judicial decisions where the courts have compelled developers to honour their promises to the purchasers.³ This decision serves as a reminder to developers that any decision to unilaterally deviate from the specifications of the SPAs is taken at their own risk. Afterall, statutory sale and purchase agreements for residential properties in Malaysia are regulated by social legislation that does not permit them to be amended unilaterally by developers.
 
Case Note by Jocelyn Lim Yean Tse (Partner) of the Dispute Resolution Practice of Skrine.
 

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