Everest Point Sdn Bhd v LIM Peck Sim (02(f)-22-04/2015(W))

AMANAHRAYA DEVELOPMENT SDN BHD .. APPELLANTS

JUSTIN CHIAH SOON AUN .. RESPONDENTS [In the Civil Appeal No.: W-02-(NVCV)(W)-741-04/2014 in the Court of Appeal at Putrajaya _____________________________________________

JUSTIN CHIAH SOON AUN

And

AMANAHRAYA DEVELOPMENT SDN BHD .. RESPONDENTS] CORUM RAUS SHARIF, PCA RICHARD MALANJUM, CJSS HASAN LAH, FCJ RAMLY ALI, FCJ ZAHARAH IBRAHIM, FCJ 2

This is an appeal by the appellants against the decision of the Court of Appeal given on 27 October 2014 which inter alia allowed the respondents’ appeal on the issue of the respondents’ claim for Liquidated Ascertained Damages (LAD) in respect of an apartment unit up to a cut-off date of 16 April 2014 (being the date the respondents were deemed to have taken actual vacant possession of the apartment unit).

For ease of reference we shall refer to the appellants herein as the defendants and the respondents as the plaintiffs as they were respectively referred to in the High Court.

The High Court had earlier allowed the plaintiffs’ claim for LAD against the 1st defendant up to 30 May 2011 (being the date of the notification by the 1st defendant to the plaintiffs of the issuance of the Certificate of Fitness for Occupation (CFO) by the Appropriate Authority). On appeal by the plaintiffs on the cut-off date for the calculation of the LAD, the Court of Appeal on 27 October 2014 reversed the decision of the High 3 Court on that issue, and ordered that the cut-off date for the plaintiffs’ claim for the LAD be extended to 16 April 2014 (being the date when the plaintiffs wrote to the 1st defendant indicating their intention to take possession). Dissatisfied with the said order of the Court of Appeal the defendants then appealed to this Court.

We heard the appeal on 21 March 2017 and allowed it with costs. We set aside the decision of the Court of Appeal and reinstated the decision of the High Court. We now give our reasons for doing so.

The plaintiffs were joint purchasers of an apartment in a project developed by the 1st defendant which was known as Subang Olive Residence, Unit No. J1-K-13-1 (the Unit). For that purpose a sale and purchase agreement dated 29 June 2005 was entered into by the parties (the SPA).

Clause 24.1 of the SPA provides that the Unit shall be completed and vacant possession shall be delivered to the plaintiffs within thirty six (36) months from the date of the SPA. (i.e. on or before 28 June 2008). Under clause 24.2, if the 1st defendant fails to deliver vacant 4 possession of the Unit as stipulated in the SPA, the 1st defendant shall be liable to pay the plaintiffs LAD calculated from day to day at the rate of ten per centum (10%) per annum of the purchase price from the expiry date for delivery of vacant possession until the date the plaintiffs take delivery of vacant possession of the Unit.

The 1st defendant was unable to deliver vacant possession within the stipulated period of thirty-six (36) months. The Unit was only completed some 2 1/2 years later.

In an attempt to deliver vacant possession the 1st defendant issued a notice of delivery of vacant possession dated 16 November 2010 to the plaintiffs. However it is not in dispute that the said notice was invalid on the ground that it was not supported by a letter of confirmation from the Appropriate Authority certifying that Form E as prescribed under the Second Schedule to the Uniform Building By-Laws 1984 had been duly submitted and checked and accepted by the Appropriate Authority, as required in clause 25.2 of the SPA. It also not in dispute that the 1st defendant only submitted the relevant Form E to the relevant authority on 13 May 2011. The CFO in respect of the Unit was duly issued by the Appropriate Authority on 25 May 2011. 5 The 1st defendant did not issue a new notice of delivery of vacant possession upon issuance of the CFO.

On 30 May 2011, the 1st defendant notified the plaintiffs about the issuance of the CFO for the Unit. On 16 April 2014, the plaintiffs wrote to the 1st defendant indicating their intention of taking vacant possession of the Unit. However the plaintiffs only took actual vacant possession of the Unit on 20 September 2016.

The plaintiffs commenced an action against the 1st defendant at the High Court on 26 April 2012 inter alia for an order that the plaintiffs be allowed to claim continuous LAD from 28 June 2008 until the date they took actual vacant possession (on 20 September 2016).

The 1st defendant filed its counter-claim against the plaintiffs for an amount of RM105,199.76 for miscellaneous charges such as maintenance charges, sinking fund and late payment interest.

On 21 March 2014, the High Court allowed the plaintiffs’ claim for LAD but only up to 30 May 2011 being the date of the notification of the issuance of the CFO for the Unit. The 1st defendant’s counter-claim 6 was dismissed. At paragraph 5 of the grounds of judgment the learned judge ruled- “5. Tempoh pembayaran ganti rugi jumlah tertentu yang boleh dituntut oleh plaintif-plaintif, pada pandangan saya, adalah dari 28.6.2008 sehingga 30.5.2011 iaitu tarikh plaintif-plaintif dimaklumkan tentang pengeluaran Sijil Layak Menduduki (ekshibit P13), iaitu selama 1067 hari. Pada tarikh pengeluaran mengikut perkiraan dalam klausa 24.2, RM141.23 sehari X 1067 = RM150,692.41. Amaun ini adalah terakru untuk dibayar pada 30.5.2011 di mana plaintif disifatkan telah mengambil milikan kosong (sila rujuk kes Mahkamah Rayuan Soon Teik Development Sdn Bhd v Liew

At paragraph 22 of the grounds of judgment, the learned judge stressed that “Adalah penghakiman saya bahawa milikan kosong telah disifatkan diberikan kepada plaintif pada 30 May 2011 iaitu tarikh plaintif dimaklumkan tentang pengeluaran sijil layak menduduki.”

Dissatisfied with the above decision, the plaintiffs appealed to the Court of Appeal only on the issue of the cut-off date for the calculation of LAD. The Court of Appeal allowed the plaintiffs’ appeal in that their claim for continuous LAD be extended up to 16 April 2014, being the date of the plaintiffs’ letter to the 1st 7 defendant indicating their intention to take vacant possession of the Unit.

On 21 April 2015, this Court granted the defendants leave to appeal on the following questions of law, namely-

in cases of an invalid notice of vacant possession, when is vacant possession delivered:

the date of certificate of fitness for occupation (CFO); or

the date when the purchaser took possession of the keys to the Unit; and

(ii) in cases of an invalid notice of vacant possession, can there be 2 different vacant possession dates in the sale and purchase agreement?

In the instant case, it is not in dispute that there was delay in the completion and delivery of vacant possession of the Unit to the plaintiffs. The delivery period of (36) months as stipulated in clause 24.1 of the SPA had lapsed, and pursuant to clause 24.2 of the SPA 8 the 1st defendant as the developer was liable to pay LAD as a result of the delay.

It is also not in dispute that the notice of delivery of vacant possession dated 16 November 2010 issued by the 1st defendant to the plaintiff was invalid for non-compliance with the requirement in clause 25.2 of the SPA as the 1st defendant had not submitted the relevant Form E as prescribed in the Second Schedule to the Uniform Building By-Laws 1984 to the relevant authority. It is also not in dispute that the CFO to the Unit was issued on 25 May 2011 and the plaintiffs were duly notified by the 1st defendant about it on 30 May 2011; and the plaintiffs only took actual vacant possession by taking the keys to the Unit on 20 September 2016, after the commencement of this case at the High Court.

The only issue in dispute relates to the cut-off date for the computation of the LAD to be paid by the 1st defendant to the plaintiffs. The question is when was vacant possession deemed delivered? Was it on the date the plaintiffs were notified of the issuance of the CFO for the Unit or the date when the plaintiffs took actual possession by taking the keys to the Unit? 9

Learned counsel for the defendants contended that the cut-off date should be the date the plaintiffs were notified that had been issued; while learned counsel for the plaintiffs contended that the cut-off date was the date when they took possession of the keys to the Unit on 20 September 2016.

The 1st defendant notified the plaintiffs about the issuance of the CFO for the Unit on 30 May 2011. In the said notification the 1st defendant informed the plaintiffs “that all the above approvals from the authorities to enable you to occupy your property have been obtained. The approval is available for your inspection at our officer. Please be reminded that you have yet to pay/settle the progressive payment and miscellaneous charges amount of RM92,312.26 as per statement enclosed. Kindly make good of the said payment soonest possible.”

The manner of delivery of vacant possession of the Unit to the plaintiffs is governed by clause 25 of the SPA. Under clause 25.1, the 1st defendant shall let the plaintiffs into possession of the Unit inter alia after the plaintiffs “having paid all monies payable under clause 4 in accordance with the Third Schedule and all monies due under this Agreement and the Purchaser having 10 performed and observed all the terms and covenants on his part under this Agreement.”

The Third Schedule to the SPA deals with the schedule of payment of the purchase price. Item 3 of the Schedule provides that “on the date the Purchaser takes possession of the said Parcel with water and electricity supply ready for connection to the Parcel”, the plaintiffs as purchasers need to pay (12.5%) of the purchase price. Item 4, provides that “within twenty-one (21) working days after receipt by the Purchaser of the written confirmation of the Vendor’s submission to and acceptance by the Appropriate Authority of the application for subdivision of the said Building”, the purchasers need to pay 2.5% of the purchase price; and item 5.

Clause 25.2 of the SPA reads- “25.2 The delivery of vacant possession by the Vendor shall be supported by:

a certificate signed by the Vendor’s architect certifying that the said Building has been duly constructed and completed in accordance with the relevant Acts, by-laws and regulations and that all conditions imposed by the 11 Appropriate Authority in respect of the issuance of the Certificate of Fitness for Occupation have been duly complied with; and

a letter of confirmation from the Appropriate Authority certifying that the Form E as prescribed under the Second Schedule to the Uniform Building By-Laws 1984 has been duly submitted by the Vendor and checked and accepted by the Appropriate Authority.”

Clause 25.3 of the SPA reads- “25.3 Such possession shall not give the Purchaser the right to occupy and the Purchaser shall not occupy the Parcel until such time as the Certificate of Fitness for Occupation for the said Building is issued.”

To fulfill the requirement prescribed in clause 25.2(a) of the SPA, a certificate of practical completion of the Unit in question signed by the 1st defendants’ Architect was issued on 9 November 2010; and the CFO in respect thereof was issued by the Majlis Perbandaran Subang Jaya, as the Appropriate Authority, on 25 May 2011. With the issuance of both certificates we can conclusively conclude that all conditions required for the issuance have been duly complied with. The CFO clearly certified 12 that the said Unit (apartment) in question “telah siap dibina …. mengikut pelan kelulusan No. A1 286/9/2 dan bahawa bangunan itu adalah layak untuk diduduki seperti yang diperakui oleh Arkitek.”

In the certificate of practical completion, the Architect had certified that: “….. in our opinion … the works are practically completed and the contractor has performed and completed all the necessary works specified in the Contract on the day named 9 November 2010.”

As required by clause 25.2(b) of the SPA, a letter of confirmation from the Majlis Perbandaran Subang Jaya as the Appropriate Authority dated 13 May 2011, certifying that the Form E as prescribed in the Second Schedule to the Uniform Building By-Laws 1984 had been submitted by the 1st defendant and checked and accepted by the Majlis, was issued.

28.

According to the evidence of SD1, the General Manager of the 1st defendant, the 1st defendant wanted to deliver vacant possession after the issuance of the CFO, but the plaintiffs refused to take it. The plaintiff insisted that they were entitled to LAD and they did not need to pay the balance of the purchase price of the Unit at all. The plaintiffs only took physical possession of the Unit when they took the keys to the Unit from the 1st defendant on 20 September 2016.

The learned judge had made her findings that “keterangan menunjukkan bahawa plaintif mengikat penyerahan milikan kosong kepada dua syarat. Pertamanya, plaintif mahu baki bersih ganti rugi tertentu diberikan bersekali dengan milikan kosong. Keduanya, penyerahan milikan kosong mesti diiringi dengan unit tersebut dilengkapi dengan peralatan yang dikatakannya telah dijanjikan oleh defendan pertama sebagaimana yang terkandung dalam surat plaintif pertama di ekshibit P16 yang antara lain menyebut – “Therefore, what LAD we have claimed so far is only an interim amount, for the final quantum of LAD can only be 14 determined when you actually deliver Vacant Possession of the unit installed with all the items and fixtures as pledged in your letters (one dated 31.5.2005 and two dated 29.06- 2005) copies enclosed. We await your instruction when we can take delivery of Vacant Possession of the unit together with the balance of LAD we are legally entitled to.”

After going through all the evidence in this case, we were satisfied that the 1st defendant as the developer was willing and ready to deliver vacant possession of the Unit when the CFO was issued. All the relevant requirements for delivery of vacant possession as stipulated in clause 25.2 of the SPA were fulfilled by the 1st defendant. The plaintiffs have failed to perform their part of the SPA by tendering the balance purchase price and other monies due and payable in respect of the Unit, which had been clearly notified in the notification from the 1st defendant dated 30 May 2011. The installation of all the items and fixtures as requested in the plaintiffs’ letter is something not included in the SPA. It is also not a term of the SPA that vacant possession of the Unit must be delivered together with the balance of the LAD payment that the plaintiffs claimed to be entitled to. The requests were clearly unreasonable. 15

In holding that the cut-off date for the payment of LAD by the 1st defendant would be the date the plaintiffs took actual vacant possession of the Unit, the Court of Appeal was relying on the decision in Sentul Raya Sdn Bhd v Hariram Jayaram & Ors [2008] 4 CLJ 618 where it was held that as the notice of delivery of vacant possession was invalid (as in the instant case), the purchasers were entitled to continue to claim LAD until they took actual possession of their apartments.

With respect, we are of the view that the decision in Sentul Raya cannot be applied to the facts of the instant case. The factual matrix in that case is different from the factual matrix in this case. In that case there was no CFO issued at the time the LAD claim was filed in court as the project in question had not been completed yet. Thus the question of the cut-off date for the LAD claim was still open. However, in the instant case, the construction the Unit in question was completed and the CFO was duly issued and the plaintiffs as purchasers were duly informed about the issuance, before the LAD claim was filed in court.

Our view is that when the CFO to the Unit was issued and its issuance notified to the plaintiffs, the plaintiffs could no longer resist vacant possession by refusing to fulfil 16 their obligation to make payment of the balance purchase price in the manner as stipulated in the SPA and making unreasonable demands. When the CFO was issued, the Unit was certified to be safe for occupation. In the circumstances the plaintiffs are not entitled to claim for LAD until the date when they took actual vacant possession by taking the keys to the Unit. This may amount to an inflated claim for LAD which is prejudicial to the 1st defendant. It also amounts to unjust enrichment of the plaintiffs.

The plaintiffs must realise that the 1st defendant’s obligation to deliver vacant possession of the Unit to the plaintiffs is governed by clause 25 of the SPA. The 1st defendant had done all that needed to be done under the SPA, i.e. to deliver vacant possession of the Unit which was certified to be safe for occupation. The fact that the earlier delivery notice dated 16 November 2010 issued by the 1st defendant to the plaintiffs was invalid does not mean that the 1st defendant has failed in its obligations under the SPA to deliver vacant possession.

On this issue, we agree with the dictum of Nallini Pathmanathan J. in Golden Quantum Acres Sdn Bhd v SSU Management Services Sdn Bhd [2014] 10 CLJ 320 when her Ladyship said: 17 “It does not follow from the foregoing that the plaintiffs are entitled to choose a date which they deem fit to ‘take’ or ‘claim’ vacant possession. To allow such a construction of cls. 26 and 27 would give rise to a vastly exaggerated claim, as it would then theoretically be open to the plaintiffs to take possession some ten years after the practical completion of the building and make claim for LAD.”

By such delay in exercising their right to take delivery of vacant possession, the plaintiffs are taking advantage of a more attractive benefit set out in the artificial formula for computation of LAD for late delivery of vacant possession.

We also agree with the Court of Appeal in Soon Teik Development Sdn Bhd v Liew Tuo Chee & Ors [2011] 6 MLJ 350, in affirming the High Court decision to the effect that “in the absence of a proper certificate of practical completion pursuant to clause 25 of the Agreement being issued, the shop lots must be presumed to have not been completed until the issuance of the certificate of fitness for occupation (CF) or anytime before.” In other words, the shop lots in that case were deemed or presumed to be completed upon the issuance of the CFO. 18

To allow the plaintiffs to take their own “sweet time” in taking delivery of vacant possession of the Unit consequently seeking to enjoy a higher amount of LAD (despite the issuance of CFO being notified to them), is clearly unjustified and unfair to the 1st defendant as the developer. The 1st defendant may be prejudiced and suffer damages for loss and damage to the Unit and/or to fixtures and fittings therein if the plaintiffs took too long to take vacant possession; more so if the plaintiffs are allowed to claim LAD for the extended period. This may not be good for the housing industry. The imposition of LAD is not to enrich the plaintiffs by refusing or delaying to take delivery of vacant possession even though the Unit was certified to be safe for occupation and they were duly notified about that.

For the above reasons and based on the facts and circumstances of the instant case, it was our finding that the Unit in question had been completed and was safe for occupation as certified in the CFO which was issued on 25 May 2011 and notified to the plaintiffs on 30 May

As the earlier notification by the 1st defendant dated 16 September 2010 was invalid, we were of the view that 19 the effective date of delivery of vacant possession in this case was the date when the issuance of the CFO by the Appropriate Authority was notified to the plaintiffs which was on 30 May 2011. Therefore the cut-off date for calculation of LAD relating to the late delivery of vacant possession of the Unit was 30 May 2011, as earlier decided by the High Court.

We therefore allowed the appeal with costs. We set aside the decision of the Court of Appeal and reinstated the decision of the High Court.

In the circumstances of this case we found it unnecessary to answer the two questions posed in this appeal. Dated this 24th day of May 2017 sgd RAMLY ALI FEDERAL COURT JUDGE

Ong Chee Kwan (with Han Li Meng) Messrs Christopher & Lee Ong 20 .. for the Appellants 2. NV Sree Harry Messrs Sree Harry & Co .. for the Respondents

Sentul Raya Sdn Bhd v Hariram Jayaram & Ors [2008] 4 CLJ

Golden Quantum Acres Sdn Bhd v SSU Management Services Sdn Bhd [2014] 10 CLJ 320 3. Soon Teik Development Sdn Bhd v Liew Tuo Chee & Ors [2011] 6 MLJ 350