Brief Facts
The appellants are the purchasers of six apartment units of a housing project developed by the respondent. The appellants, amongst other things, claimed for breach of contract under Cl. 12 as the respondent had changed the building material for the outer brick walls of the properties from autoclaved aerated concrete building block to flexcore, without the appellants’ written consent.
The High Court allowed the appellants’ claim and ordered assessment of damages pertaining to the respondent’s breach of Cl. 12. During assessment, the appellants produced a quotation prepared by a building contractor and the Senior Assistant Registrar assessed damages to be in the sum of RM380,500. Dissatisfied with the quantum of damages awarded, the respondent appealed to the judge in chambers who dismissed the appeal. The respondent was, however, successful in its appeal to the Court of Appeal, hence the appellants’ appeal to the Federal Court.
The Question of Law
The question of law for the appeal before the Federal Court was:
“Whether a claim for damages, for the purpose provided in Clause 12 of the statutory sale and purchase contract under Schedule H of the Housing Development (Control and Licensing) Regulations 1989 requires proof of actual loss to be shown before damages could be awarded.”
Decision of the Federal Court
At the outset, the Federal Court held that pursuant to Cl. 12, the appellants are at the liberty to ask for a reduced price for the properties
or to claim for damages in the event of the respondent’s wrongful act of using different building materials from the contracted materials without the appellants’ written approval, and there is nothing in Cl. 12 to say that damages could only be claimed in the event the respondent used material that is cheaper than the contracted material. Thus, if the appellants opt to claim for damages, no unfavourable inference can be drawn against them, and it is unjustified to conclude that the change in the materials used had no adverse effect on the value or purchase price of the properties. Such inference, the Federal Court said, sends the wrong message to housing developers that they could change contract materials at their whims and fancies without having to face any legal consequence. Further, the Federal Court held that the Court of Appeal’s observations that other owners of the housing project did not file similar claims against the respondent and that the necessary certificates of fitness for occupation had been issued by the relevant authority, are misconceived and “
irrelevant to the question of whether the appellants were entitled to damages for the respondent’s breach of Cl. 12 of the SPAs.”
Having laid down its view on the interpretation to be given to Cl. 12, the Federal Court ruled that in order to be entitled to damages for the respondent’s breach of Cl. 12, the appellants must prove their losses and “
it is not enough to write down the particulars” only. The Federal Court then proceeded to consider whether the appellants had successfully discharged their burden to prove the actual losses suffered from the respondent’s breach of Cl. 12.
The Federal Court noted that the appellants had produced a quotation prepared by a building contractor to support their claims for the cost of replacing the materials used for the outer brick walls. In respect of the Court of Appeal’s view that the actual remedial works must first be carried out and actual expenses must first be incurred before damages could be awarded, the Federal Court relied on two English cases of
WM. Cory & Sons Ltd v Wingate Investments (London Colney) Ltd (1981) 17 BLR 104 and
Strange And Others v Westbury Homes (Holdings) Ltd And Another [2009] EWCA Civ 1247 and held that the appellants were “
prima facie entitled to the cost of replacing … as would put them in a position to have the building material they contracted for”.
The Federal Court found that the quotation provided a detailed breakdown of the works to be carried out as well as the rate and amount for each item of work which included the cost of the replacement of materials and there was, therefore,
prima facie proof of the cost of the remedial works.
In the absence of any rebuttal evidence or alternative amount tendered by the respondent, who, as the developer of the housing project, could have easily determined if the sum quoted was reasonable or otherwise, the Federal Court found that the quotation remained uncontradicted and the respondent’s contention that the sum of RM380,500 claimed by the appellants was “
excessive and unreasonable” was nothing more than a bare and unsubstantiated allegation. The sum of RM380,500 must be taken as representing the reasonable cost of the remedial works. As such, the Federal Court held that damages in the sum of RM380,500 had been proven by the appellants.
Accordingly, the leave question was answered in the affirmative and the decision of the High Court was reinstated.
Comments
This Federal Court decision has provided clarity to housing purchasers on their rights to seek damages under Cl. 12 in the event of the unauthorised use by a developer of building materials which are different from the contracted materials. This decision clarifies that Cl. 12 not only covers the use of “cheaper” material but also the use of materials which are not consented to by the housing purchasers. Although the housing purchasers bear the burden to prove the losses caused by the unauthorised change of materials, there is no requirement to prove that such losses have actually been incurred or that the remedial work has been carried out. Evidence tendered by the purchaser detailing the remedial work required and the cost thereof may constitute
prima facie proof of the losses until and unless it is rebutted by the housing developer.
Case note prepared by Jesy Ooi (Partner) and Witter Yee (Senior Associate) of Skrine.