Dr. Looi Mun Choon v 1. Paragon Promendade Sdn Bhd (BA-22NCVC-55-02/2021)

PARAGON PROMENADE SDN BHD (No. Syarikat: 561009-T)

PARAGRENE LAND SDN BHD (No. Syarikat: 400051-H) …DEFENDAN-DEFENDAN

The 1st Defendant in this suit applies [enclosure 24] to strike out the Plaintiff’s pleadings and consequently the action against it, invoking Order 18 rule 19 of the Rules of Court 2012. The application is premised on all the paragraphs in O. 18 r. 19. 2 Background facts

The Plaintiff’s claim is a representative action brought on behalf of himself and 45 other purchasers of condominium units in a development named as Paragon 3. The names of the purchasers (“home buyers”) he represents are set out in Appendix A to the Statement of Claim. The Plaintiff’s pleaded case against both the Defendants is summarised as follows.

Both the Defendants are locally incorporated companies. They are developers. They share the same business address at No. 9.07, Level 9, Amcorp Tower B, Amcorp Trade Centre, 18, Persiaran Barat, 46050, Petaling Jaya, Selangor Darul Ehsan.

The 1st Defendant, which had undergone several name change, its prior name being YONGKASA MARKETING SDN BHD and PARAGON MASTERY SDN BHD, issued an advertisement in the local newspapers in relation to a luxury development known as Paragon 3. The development was to comprise of three towers, complete with common facilities for the use of residents of the said development. The 1st Defendant represented the Paragon 3 project to be theirs. A show room was also constructed for viewing by interested buyers.

The Plaintiff was given brochures representing the features and facilities of the development which will be constructed as part of Paragon 3. Upon such representation, the Plaintiff decided to enter into sale and purchase agreements (“SPA”) with the 1st Defendant 3 to purchase condominium units in the Paragon 3 development (“the said property”).

Upon completion and handing over of the said property, the Plaintiff discovered to his disappointment, there were numerous defects, poor workmanship and non-compliance to the description and specification stipulated in Schedule 4 of the SPA. The common facilities which were represented to be part of the development was not completed and not available.

To date, various facilities have yet to be constructed comprising inter alia:-

Alfresco concept pool side cafetaria;

(ii) Thematic 4-storey high water fall;

(iii) Multi-purpose hall;

(iv) Launderette;

Kindergarten;

(vi) Café;

(vii) Reading room; and

(viii) Games room

The Plaintiff rely on Clause 13 of the SPA which states, Material and workmanship to conform to description “The said Parcel together with all the common property shall be construed in accordance with the description set out in the Fourth Schedule and in accordance with the plans approved by the Appropriate Authority which description and plans have been accepted and approved 4 by the Purchaser, as the Purchaser hereby acknowledges. No changes thereto or deviations therefrom shall be made without the consent in writing of the Purchaser except such as may be required by the Appropriate Authority. The Purchaser shall not be liable for the cost of such changes or deviations in the event that the changes or deviations involve the substitution of use of cheaper materials or the omission of works originally agreed to be carried out by the Vendor, the Purchaser shall be entitled to a corresponding reduction in the purchase price herein or to damages, as the case may be.”

The Plaintiff thereupon allege that there was a fundamental departure from the representation given earlier which had induced him to enter into the agreement with the 1st Defendant and to subsequently execute the SPA. The Defendants were also alleged to have breached their obligations under the SPA by failing to deliver the said property which failed to conform with the description in the Fourth Schedule of the SPA.

The claim of misrepresentation and breach of terms of the SPA against both the Defendants were premised on inter alia, the following matters:-

the car parks were to be constructed on four floors but there were only three floors of car parks;

(ii) the guardhome which was constructed was not the two-storey guardhome as represented in the brochure;

(iii) the grand fountain was unlike what was represented in the brochure; 5

(iv) there were numerous defects in the construction rendering it unsafe for occupation notwithstanding the fact that the Certificate of Completion and Compliance had been issued.

These unsatisfactory features of the development had affected the Plaintiff’s enjoyment of their condominium unit. The Plaintiff thereupon seeks relief in the nature of declaration and damages. Grounds for striking out the Plaintiff’s claim

The 1st Defendant advanced 4 grounds in its affidavit in support of the application to strike out the Plaintiff’s claim. The first is the Plaintiff’s lack of locus standi to institute the present proceedings. Except for the home buyers listed as no. 18, 25 and 26 in Appendix A, the other home buyers failed to exhibit the requisite notices pursuant to section 22C of the Housing Development Act 1966. Section 22C makes it mandatory for the financiers of the homebuyers to be notified in writing of the commencement of a suit against the housing developer.

The second ground is that the right party to institute the action in relation to common property ought to be by the joint management body (“JMB”). As the claim here is in relation to common property, the claim brought by the Plaintiff is tantamount to an abuse of the process of the court.

In addition to the above two grounds, the 1st Defendant also contends that the claim of the Plaintiff is premature as it had deposited a sum of RM 325,660.39 with the Commissioner of 6 Buildings, which sum is to be utilised for rectification works in respect of the common property. Finally, the 1st Defendant submits that a representative action is not the suitable mode for a claim based on misrepresentation as the evidence of such claim would have to be adduced individually by the home buyers. Analysis and findings of this court

The law on striking out of pleadings is trite. This power is exercised to avoid the unnecessary time and expense of a trial. However, the courts have recognized that as this is a summary power, it is only to be exercised in plain and obvious cases and where the claim is obviously unsustainable. This principle has been restated in many cases. (See: Bandar Builders Sdn Bhd & Ors v United Malayan Banking Corporation Bhd [1993] 3 MLJ 36; Seruan Gemilang Makmur Sdn Bhd v. Kerajaan Negeri Pahang Darul Makmur & Anor [2016] 1 CLJ 1).

The meaning of obviously unsustainable was explained by the Court of Appeal in Sivarasa Rasiah & Ors v Che Hamzah Che Ismail & Ors [2012] 1 MLJ 473 as follows, [16] The test for striking out as laid down by the Supreme Court in Bandar Builder's case is that the claim on the face of it must be 'obviously unsustainable'. The stress is not only on the word 'unsustainable' but also on the word 'obviously' ie the degree of unsustainability must appear on the face of the claim without having to go into lengthy and mature consideration in detail. If one has to go into a lengthy and mature consideration in detail of the issues of law and/or 7 fact, then the matter is not appropriate to be struck out summarily. It must be determined at trial.

To succeed in its application, the 1st Defendant must demonstrate that the Plaintiff’s claim must be one, on the face of its pleadings, hopeless and doomed to fail. The court need not delve into the merits of the claim at this stage when considering an application to strike out. If a lengthy and mature consideration of the issues of fact and law is required, then the claim ought not to be struck out, but determined at a trial instead.

I shall now deal with the grounds advanced by the 1st Defendant. Locus standi

The contention of the 1st Defendant as to lack of locus standi is premised on non-compliance of section 22C of the Housing Development (Control & Licensing) Act 1966 which provides as follows,

Right to initiate and maintain actions Notwithstanding anything contained in any written law or any rule of law, agreement, assignment or charge lawfully entered into between a homebuyer as defined in section 16A and his financier, a homebuyer shall be entitled on his own volition and in his own name to initiate, commence, institute and maintain in any court or tribunal any action, suit or proceeding against a housing developer or any other person in respect of any matter arising out of the sale and purchase agreement entered into between the homebuyer and the housing developer 8 provided the homebuyer's financier under a deed of absolute assignment is notified in writing either before or within fourteen days after the action, suit or proceeding against the housing developer has been filed before any court or tribunal.

The lack of locus standi rests on the fact that no notice to Plaintiff’s financiers was tendered in evidence. Except for home buyer no. 18, 25 and 26 as listed in Appendix A of the Statement of Claim, the rest of the home buyers took financing.

The contention of the 1st Defendant to my mind, is misconceived. Section 22C cannot clothe the home buyers with locus and neither the non-compliance of it should be used to defeat an action brought by the home buyers. It has been gainsaid that the Housing Development (Control & Licensing) Act 1966 is a social legislation designed to protect home buyers and the interests of the purchasers shall be the paramount consideration against the developer. (See: Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other appeals [2020] 1 MLJ 281 Federal Court).

The thrust of the section is to allow a home buyer to initiate proceedings against a housing developer in his own name. The notice is required to be served as the law recognises that home buyers may need financing to purchase the property and the financiers would have to be informed as the latter may have rights which would be in their interest to protect. The absence of a notice cannot have the effect of rendering the claim unsustainable as that would defeat the very purpose of the provision. 9 Action ought to be brought by the JMB

The 1st Defendant contends that as the subject matter of the suit concerns common property, the action ought to be commenced by the JMB. In support of its contention, section 143 of the Strata Management Act 2013 is referred to.

The provision referred to has no application to the factual matrix of this case. Section 143(2) reads,

Representation in proceedings

……

Where all or some of the parcel owners or proprietors of the parcels in a development area-

are jointly entitled to take proceedings for or with respect to the common property in that development area against any person or are liable to have such proceedings taken against them jointly; or

are jointly entitled to take proceedings for or with respect to any limited common property in that development area against any person or are liable to have such proceedings taken against them jointly, the proceedings may be taken-

(A) in the case of paragraph (2)(a), by or against the joint management body or management corporation; or 10

(B) in the case of paragraph (2)(b), the subsidiary management corporation constituted for that limited common property, as if the joint management body, management corporation or subsidiary management corporation, as the case may be, were the parcel owners or the proprietors of the parcels concerned.

This provision has to do with the issue of representation in suits pertaining to common property involving parcel owners and the joint management body or management corporation relating to matters falling within the scope of the Act.

This is not the case here. The Plaintiffs’ case is founded on misrepresentation and breach of contract and damages are sought as a consequence. These are private law causes of action which the home buyers can institute against the developer. It is not for a management corporation or the JMB to institute against the developer in respect of these causes of action.

Reference is made to the case of Dua Residency Management Corporation v Edisi Utama Sdn Bhd & Anor [2021] MLJU 140 where the management corporation brought an action inter alia against the developers for breach of contract and/or negligence predicated on inadequate maintenance which resulted in latent defects discovered in several parts of Dua Residency Condominium. Justice Lim Chong Fong (HC) held, 11 [93] The First Defendant denies that it is liable to the Plaintiff for breach of contract because this Suit is not a case of individual purchasers rule against the developer but a case of the management corporation rule against the developer. There is plainly no contract whatsoever between the Plaintiff and the First Defendant. That notwithstanding, the First Defendant strenuously contended that the Plaintiff cannot take any benefit of the SPA. [94] In the Singapore Court of Appeal case of RSP Architects Planners & Engineers v Ocean Front Pte Ltd and another appeal [1995] 3 SLR(R) 653, LP Thean JA held as follows: “The management corporation had no cause of action in contract. It would be staring the language of the sale and purchase agreements to say that it was the intention of the developer and the purchasers that the provisions in their sale and purchase agreements, which related to the construction of the condominium, would run with the land. Such agreements were intended to govern the relations only between the developer and its purchasers and clearly the developer did not intend to extend the benefit of these provisions to others down the line.” [95] I share Justice Thean’s views. Thus and unless the SPA are assigned or novated over by the purchasers of the Condominium to the Plaintiff, I find and hold that there is no legal standing for the Plaintiff to initiate and sustain the cause of action of breach of contract against the First Defendant. In other words, it is only the purchasers of the Condominium who can sue the First Defendant based on the SPA. It is therefore unnecessary to consider further whether the First Defendant is in breach of contract by reason of my findings in paragraphs [74], [83] and [88] above. 12 Plaintiff’s action is premature

The 1st Defendant claims that it has deposited a sum of RM 325,660.39 with the Commissioner of Buildings to rectify defects on the common property, pursuant to the provisions of section 92(1) and (3) of the Strata Management Act 2013.

The relevant provision states,

Developer to pay deposit to rectify defects on common property

A developer of a building shall deposit in cash or bank guarantee with the Commissioner such sum as may be determined by the Commissioner for the purpose of carrying out any work to rectify any defects in the common property of the development area after the completion of the common property.

The deposit referred to in subsection (1) shall be paid to the Commissioner upon the handing over of vacant possession.

The Commissioner may use the deposit for the purpose of carrying out any work which is necessary to rectify any defects in the common property of the development area.

Where the Commissioner has determined that the deposit is insufficient for rectifying the defects to the common property, the Commissioner may direct the developer to deposit within fourteen days such further sums as the Commissioner may determine.

Any unexpended deposit shall be refunded to the developer on the expiry of the defect liability period for the development area. 13

Any developer who fails to comply with subsection (1) commits an offence and shall, on conviction, be liable to a fine not exceeding five thousand ringgit and to a further fine not exceeding fifty ringgit for every day or part thereof during which the offence continues after conviction.

The 1st Defendant’s reliance on this provision to assert that the Plaintiffs’ claim is premature, is wholly misconceived. The provision referred to is to provide for the developer’s statutory obligation to pay a deposit for rectification works to the common property. The fact that such an obligation has been performed cannot be a basis to contend that the Plaintiff’s claim in contract, is premature. The Plaintiff’s claim is not premised on the 1st Defendant’s breach of statutory obligation. Unsuitability of representative action

The 1st Defendant contends that a suit premised on misrepresentation has to be individually proven by each of the home buyers through evidence led by them. The representative action therefore, has been wrongly instituted.

Representative actions are allowed to be brought pursuant to Order 15 rule 12(1) of the Rules of Court 2012 which provides as follows, Representative proceedings (O. 15, r. 12)

(1) Where numerous persons have the same interest in any proceedings, not being such proceedings as are mentioned in rule 13, 14 the proceedings may be begun and, unless the Court otherwise orders, continued by or against any one or more of them as representing all or as representing all except one or more of them.

The Plaintiff and the 45 other home buyers clearly have a common grievance founded on a common cause of action in contract and misrepresentation. Similar clauses are relied on for the alleged breach of the SPA. They also seek for a common relief of damages.

In the Court of Appeal case of Maju Puncakbumi Sdn Bhd v Ch’ng Han Keong (membawa guaman untuk Unit No. C-21-08 untuk “The Arc @ Cyberjaya” dan juga untuk unit mereka masing-masing untuk “The Arc @ Cyberjaya” sepertimana yang disenaraikan di dalam lampiran yang dikepilkan Bersama writ ini) [2019] 8 AMR 625, the Court cited several instances of representative actions and held them to have been correctly brought as follows, [38] There are similar authorities where a representative action by purchasers has been held to be suitable where the claims are in respect of common interests. In Cheong Kok Khuen v Kolektra Recreation Sdn Bhd [2010] AMEJ 621; [2010] MLJU 1236, the representative action was filed by the plaintiff and 135 purchasers against the developer for a breach of a term in the deed of mutual covenants entered into between the developer and the 136 purchasers. In the case of Voon Keng & Ors v Sykt Mazwina Development Sdn Bhd [1990] 3 CLJ (Rep) 329, the plaintiff had filed a representative action on behalf of the purchasers including himself against the developer to claim for agreed liquidated damages in respect of sale and purchase agreements with different dates and where the claims are for different amounts due. The High Court held as follows: 15 In the circumstances of the present case, the plaintiffs were members of the same class, had a common grievance and that the relief sought was in its nature beneficial to all whom the plaintiffs represented and thus the representative action could continue although the amounts due to each of them may well be different in view of the different dates of the sales and purchase agreements.

I therefore find that the premise for a representative action pursuant to Order 15 rule 12 (1) to have been satisfied, and correctly brought by the Plaintiff.

For the foregoing reasons, I find no merits in the grounds advanced in support of the striking out application. Consequently, the application in enclosure 24 is dismissed and the 1st Defendant is ordered to pay costs of RM 3,000 to the Plaintiff. Dated : 8th January 2022 ………-sgd-…….….. Alice Loke Yee Ching Judicial Commissioner High Court of Malaya at Shah Alam 16 Counsel for the Plaintiff : Mr. Puvarasan Balaiyah (Mr. Muthiah Karupaya with him) Tetuan Muthiah & Arsh Counsel for the 1st Defendant : Mr. MK Rajasegaran (Tetuan Pretam Singh, Nor & Co.)