“Your World In One Place”: High Court holds Developer liable for Unfulfilled Promise

In Toh Shu Hua & Ors v Wawasan Rajawali Sdn Bhd [2023] 2 CLJ 310, the High Court in what may be a ground-breaking decision, awarded damages of RM50,000 each to 122 apartment purchasers against a housing developer for failing to fulfil its promise to provide the amenities in the vicinity of the apartment development as indicated in the sales brochure and other sales activities.
 
Relevant facts
 
A representative action was brought by 122 plaintiffs against the first defendant, a housing developer, for purchases of apartments in a project developed by first defendant (“project”). The plaintiffs also named the first defendant’s parent company as the second defendant in the claim.
 
The plaintiffs’ claim against the defendants was based on three grounds, namely (i) damages for late delivery of the apartments; (ii) loss suffered as a result of misrepresentation by the defendants as to the nature of the project; and (iii) damages due to defects within the apartments and the common areas.
 
This commentary concerns only the second head of claim asserted by the plaintiffs, namely misrepresentation. In essence, the purchasers contended that they were misled by the representation made by the first defendant in the sale brochures, in particular the phrase “Your world in one place”. As the project included other amenities, the brochures contained not only details of the apartments but also of other amenities, such as a shopping mall, serviced apartments and street shopping quarter, comprised in the project.
 
Misrepresentation
 
Section 18 of the Contracts Act 1950 (‘the Act’) states as follows:
 
Misrepresentation includes:
(a)  the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(b)  any breach of duty which, without an intent to deceive, gives an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice, or to the prejudice of anyone claiming under him; and
(c) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.
According to the learned Judge, for ‘misrepresentation’ under section 18 of the Act to apply in this case, “there must be inter alia a positive assertion in a manner not warranted, breach of duty with intent to give advantage thereby inducing a party to the agreement to make a mistake as to the substance of the agreement.”
 
In the Judge’s opinion, the positive assertions in this case were contained in the brochures published to promote the sale of the apartments to which the public, including the plaintiffs, had access to, as well as in the sales pitch of the sales executives. The learned Judge added that the publication of sales brochures and the sales pitch of the sales executives are common features in the sale of properties in Malaysia which the court can take judicial notice of. Accordingly, His Lordship was of the view that it was unnecessary for each of the plaintiffs to testify as to the manner they were individually convinced to purchase the apartments and it can be inferred that each of the plaintiffs was induced to purchase their apartments based on any of the sales methods employed by the defendant.
 
High Court Found Misrepresentation
 
The learned Judge highlighted that the first defendant had promised a complete township for the purchasers of the apartments, i.e. the project promised a person purchasing a property to enjoy work, play, recreate in one area, as evinced by the use of the phrase “Your world in one place” in the brochures. Embodied within this promise of the world in one place were “a self-sustained integrated development” and “a diverse ‘habitat’ in which to work, play and thrive.”
 
The Court rejected the defendants’ contention that the brochures were only an invitation to treat as they were worded in the form of promises. From the evidence adduced, His Lordship held that the promise of “your world in one place” was not achieved and not likely to be achieved in the near future, due to the glaring omission of the shopping mall and other amenities and the overall lack of vibrancy promised. The learned Judge added that “It is clear that what was pictured in the brochures was not even remotely visible at present.”
 
Developer Cannot Rely on Exclusion Clause
 
The Court also rejected the defendants’ argument that the brochure contained an exclusion clause which safeguarded the defendants from any discrepancy in the description of the project for the following reasons: first, the exclusion clause was in a fine minute wordings at the bottom of the page; and second, in marketing the project, there must be a grain of truth in the promise made even if not fully accurate, and even if there is an exclusion clause.
 
The Court noted that the project was not even a semblance of the lifestyle promised and pictured in the marketing of the project. His Lordship added that the defendants were under a duty to give a near accurate description of the project which they have failed to do with the non-completion of many of the amenities promised.
 
In light of the above, the High Court ruled that the defendants did perpetuate misrepresentation on the purchasers of the apartments, including the plaintiffs. The Court further ruled that the plaintiffs had been influenced to buy the apartments by the way the project was marketed by the first defendant.
 
Although section 19 of the Act allows a party aggrieved by a misrepresentation to either rescind the contract or insist the contract be performed and be put in a position in which he would have been if the representation made had been true, the Judge was of the view that the plaintiffs were not seeking to rescind the contract but to be compensated for the loss of the value which the property would otherwise have been worth if the representation had been true.
 
According to the Judge, the real loss for the plaintiffs is the loss of enjoyment of the use of the apartments in a manner promised to them. The enjoyment of working, playing and recreating all in one place cannot be enjoyed at the moment and even in the future. Whilst acknowledging the difficulty in quantifying the loss of enjoyment, the Court was nevertheless of the view that some monetary compensation should be awarded to the plaintiffs, but that such amount should be reasonable and should not burden the defendant in view of the large number of claimants involved. Having weighed these factors, the learned Judge awarded the sum of RM50,000 to each of the plaintiffs for the loss of enjoyment on the promise of the first defendant.
 
In coming to his decision on the amount of damages awarded to the plaintiffs for loss of enjoyment, the Judge declined to accept a report adduced by the plaintiffs in which a valuer had provided an opinion of the value of the property in the event all the amenities had been provided by the defendants as promised against the present value in its present state. In the Court’s view, this is not a proper remedy as the loss of value of the property will only be suffered if the plaintiffs had intention to sell their apartments which none of the plaintiffs have indicated in this case. The fact that the plaintiffs were asking for the defects to be rectified indicated that the plaintiffs intended to stay at the apartments.
 
Other Significant Findings
 
The Court noted that the defendants had taken a defiant and combative attitude in matters that could have been resolved much earlier and with the consultation of the residents. There was also no indication or evidence from the defendants showing that they will carry out all the promises as stated in the brochure especially the ‘world in one place’. In light of this, the Court awarded the sum of RM2,000,000 for aggravated damages, which sum is to be shared amongst the plaintiffs.
 
As the learned Judge was of the view that there was no evidence that the second defendant was involved in the project or was the ‘controlling mind’ of the first defendant, the Judge held that this was not a proper case to lift the corporate veil and dismissed the plaintiff’s claim against the second defendant.
 
Comments
 
This decision will no doubt raise serious concerns among property developers especially those who promote a particular development as part of a larger development scheme to attract home buyers.  In this case, the High Court not only held that the failure by the developer to build the amenities comprised in the wider development scheme described in the sale brochure amounted to a contractual misrepresentation, but also held that the developer could not rely on the exclusion clause in the sales brochure on the ground that wordings of the clause were too minute and tucked away at the bottom of the page.
 
The plaintiffs and the first defendant have appealed the High Court’s decision to the Court of Appeal. It will be interesting to see the extent to which the learned Judge’s decision will be upheld by Court of Appeal.
 
Case note by Kok Chee Kheong (Partner) of the Corporate Practice and Karen Tan (Senior Associate) of the Dispute Resolution Practice of Skrine.
 

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