Ruling in housing development dispute sets precedent for homebuyer claims

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When the case was brought to the Federal Court, the Federal Court reversed the decision of the Court of Appeal.

When the case was brought to the Federal Court, the Federal Court reversed the decision of the Court of Appeal.

Contributed by Gregory Das

The Federal Court recently delivered a ruling in housing development disputes which will have a significant impact on the powers of the Tribunal for Homebuyer Claims and the principle of estoppel.

The case, Country Garden Danga Bay Sdn Bhd vs Tribunal Tuntutan Pembeli Rumah and Another (2020), arose from a challenge against the Tribunal’s decision to allow a purchaser’s claim for damages against a developer. The apartment unit was part of the Country Garden Danga Bay project in Johor. After vacant possession was delivered, the purchaser renovated the unit to his requirements. 

Through the Tribunal, the purchaser then filed a claim against the developer and complained that the unit was contrary to the specifications under the Sale and Purchase Agreement (SPA). The purchaser alleged that the unit should have included a covered balcony as that feature was represented to him by way of the unit’s display model, viewed before the purchase.  

At the Tribunal proceedings, a team inspected the unit to assess the purchaser’s complaints and found there to be sufficient evidence to support the purchaser’s claim of unauthorised changes to the specifications in the SPA. Thus, the Tribunal modified the terms of the SPA to include a provision that the purchaser is entitled to a covered balcony as part of the unit. The Tribunal also directed that the purchaser be paid RM50,000 in compensation.

When the developer attempted to challenge the Tribunal’s decision, they failed at the High Court and the Court of Appeal. However, when the case was brought to the Federal Court, the Federal Court reversed the decision of the Court of Appeal and struck down the decision of the Tribunal. In so doing, the Federal Court made pertinent pronouncements on the housing development laws in the country. 

The Federal Court first recognised that the SPA did not require there to be a covered balcony in the unit. 

This led to the finding that Tribunal’s decision was unlawful because the Tribunal’s jurisdiction is limited to a claim based on a cause of action arising from the SPA between the homebuyer and the housing developer.

The Tribunal was found to be in the wrong when it changed the content of specifications under the SPA. The power of the Tribunal to vary terms or set aside the contract wholly is only when there is a clause in the SPA which is inconsistent with the statutory terms of the contract itself.

Next, the Federal Court rejected the purchaser’s claim of inconsistency between the unit and the SPA because the purchaser had accepted vacant possession of the unit and had taken steps to renovate the unit. 

“The purchaser could not claim that he got the wrong unit but on the other hand accepted delivery of vacant possession and renovated it... We were of the view that the Tribunal was wrong when it failed to appreciate that the second respondent had affirmed the contract as it stood on its terms which did not have a term for a covered balcony when the second respondent accepted delivery and renovated the said unit,” Federal Court judge Zaleha Yusof ruled.

The Federal Court’s judgment sets an important precedent on the powers of the Tribunal in determining claims of purchasers. The principle of estoppel prevents individuals from arguing something that contradicts their previous statement. 

Such claims are to be determined on the express terms of the SPA and cannot be made on the premise of representations made before the execution of the contract. This means that the Tribunal cannot determine claims of purchasers based on statements made to them by salespersons at the showrooms of developers, as an example. 

Further, the Federal Court decision is significant in limiting the claims that can be made against developers where purchasers have accepted vacant possession of the housing unit. In such instances, it would be difficult for a purchaser to successfully claim for losses that arise from any inconsistencies between the unit and the SPA, particularly where the purchaser has renovated the unit.

Gregory_Das

Gregory Das is an Advocate & Solicitor of the High Court of Malaya. 


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