Icon City Development Sdn Bhd v K-Shin Corporation Sdn Bhd (W-02(NCvC)(W)-1596-08/2018)

ICON CITY DEVELOPMENT SDN. BHD. (Company No.: 731177-K) … DEFENDANTS

SN LOW & ASSOCIATES SDN BHD (Company No.: 228023-K) CORAM: LEE SWEE SENG, JCA LEE HENG CHEONG, JCA MARIANA BINTI HAJI YAHYA, JCA 08/11/2022 10:54:31 W-02(NCvC)(W)-1596-08/2018 Kand. 55 S/N 19vRbMidFUKWwd8bhlTiuw GROUNDS OF JUDGMENT

The Appellant was the 1st Defendant in the High Court (“Appellant”) whilst the Respondent was the Plaintiff in the High Court (“Respondent”). The Respondent’s case against SN Low & Associates Sdn. Bhd., which is a body of professional Architects and which is the 2nd Defendant in the High Court had been struck out.

The Appellant appealed against the decision of the High Court in allowing the claim of the Respondent against the Appellant pursuant to the Sale and Purchase Agreement dated 30/6/2011 ("SPA") for the liquidated ascertained damages (“LAD”) for the delay in delivery of the vacant possession of a unit of eight-storey shop offices identified as Parcel No. A-16, Block No. A ("Shop Office") in the Icon City Project (“Project”) as well as for the refund of services charges and insurance which were paid prematurely.

The pertinent facts of this case have been summarized by the learned High Court Judge (“learned High Court Judge”) in her Grounds of Judgment and we will adopt the same herein for ease of reference. They are as follows: "(1) On 30/6/2011, the Plaintiff entered into a contract with the 1st defendant vide a sale and purchase agreement to S/N 19vRbMidFUKWwd8bhlTiuw purchase the shop office from the 1st defendant;

The Certificate of Completion and Compliance ("the CCC”) of the Shop Office was only obtained by the Respondent on 26/8/2016, i.e. after the Respondent filed its Suit on 5/8/2016, which copy of the CCC was served on the Respondent vide the Appellant's S/N 19vRbMidFUKWwd8bhlTiuw letter dated 2/9/2016. (Enclosure 24 at page 128; RA/2D/734)

The Respondent’s case against the 2nd Defendant was for negligence in the issuance of 2 architect’s letters of extension of time dated 14.8.2015 and 21.12.2015 respectively (collectively “Architect’s Letters”). The 2nd Defendant was appointed by the Appellant to act as the Appellant’s consultant architect and is the appointed Architect under the SPA (“Architect”). The 2nd Defendant applied to strike out the Suit against them vide a Notice of Application dated 15/9/2016 which was allowed by the High Court on 8/8/2017. An appeal by the Respondent against that decision to the Court of Appeal was dismissed.

The reliefs sought by the Respondent against the Appellant can be gleaned from the Amended Statement of Claim (Enclosure 24 at pages 130- 149; RA/1A/136-155), particularly pages 153-154 (English version) (Enclosure 24 at pages 147-148; RA/1A/153- 154).

After full trial, the learned High Court Judge (“learned High Court Judge”) found in favour of the Respondent.

Dissatisfied, the Appellant appealed against this decision to this Court.

This is an unanimous decision of the Court. We heard this appeal on 6.5.2021 and allowed the appeal in part. These are our grounds for our decision. S/N 19vRbMidFUKWwd8bhlTiuw

The parties herein shall be referred to, in their respective capacities before this Court.

After full trial, the learned High Court Judge found in favour of the Respondent, holding that the Appellant w a s liable to the Respondent for, inter alia, LAD in the sum of RM1,779,726.02 and other associated claims due to the delay of the Appellant, in delivering the vacant possession of the Shop Office. The learned High Court Judge granted inter alia the following orders and sums in the Court Judgment dated 18/7/2018 with interests and costs as follows: "(1) Surat-Surat Arkitek bertarikh 14/8/2015 dan 21/12/2015 bukan lanjutan masa di bawah klausa 13.1.1 Perjanjian Jual Beli bertarikh 30/6/2011 antara Plaintif dan Defendan;

Before us, the Appellants contended inter alia as follows:-

(a) That the learned High Court Judge erred in her decision and also granted a Judgment which is excessive and beyond the ambit of the action and/or the pleaded case;

(b) That the learned High Court Judge erred in awarding the LAD as it was not proven by the Respondent;

(c) That the learned High Court Judge was wrong in granting the interest on the LAD, to run from a date earlier than the Judgment date;

(d) That there were extensions of time granted by the Architect pursuant to Clause 13.1.1 of the SPA by way of the Architect’s Letters which extended the time for the Appellant to deliver vacant possession until 15.1.2016;

(e) That there can be no cause of action if the Respondent did not take possession as clause 13.1.3 of the SPA stipulated that the Respondent can only sue for LAD only if the Respondent took possession of the Shop Office. Thus, the Respondent had no cause of action as the CCC was only obtained on 26/8/16 and the writ was filed on 5/8/16. Thus, the present action was premature; S/N 19vRbMidFUKWwd8bhlTiuw and

(f) That the learned High Court Judge had introduced an unpleaded cause of action based on purported "implied term" into the SPA which is directly contradictory to the plain and ordinary meaning of words of the SPA. THE RESPONDENT’S CONTENTIONS

The Respondent inter alia contended as follows:

(a) That the Appellant allegedly delivered vacant possession of the Shop Office to the Respondent by 25.2.2016. However, the Shop Office was not ready for delivery of vacant possession for various reasons;

(b) That the Architect's Letters cited disputes or issues arising between the Appellant and its contractor, which cannot be a cause beyond the Appellant's control as defined in Clause 13.1.1 of the SPA. Thus, the Architect's Letters are invalid;

(c) Further, the Architect at trial admitted that the Architect's Letters were merely to inform the Appellant of delays, and were not issued pursuant to the SPA and the Architect's Letters make no mention of the SPA or clause 13.1.1; S/N 19vRbMidFUKWwd8bhlTiuw

(d) That the learned High Court Judge correctly found that the Architect's Letters were not valid and not applicable, and that the events the Appellant relied on (namely, breaches and defaults by its own main contractor) were not out of the Appellant's control and did not entitle the Appellant to additional time;

(e) That valid vacant possession of the Shop Office was not delivered until Essential Amenities were available for the Shop Office and the CCC for the Shop Office issued;

(f) That LAD accrued from the end of the Specified Period on 4.6.2015 until issuance of the CCC on 26.8.2016; and

(g) That the sinking fund premium, service charges and insurance period paid by the Respondent for the Shop Office premised on invalid vacant possession was premature and ought to be refunded to the Respondent. OUR ANALYSIS AND DECISION

We were mindful of the limited role of the appellate court in relation to findings of facts made by the court of first instance. In the case of Lee Ing Chin v. Gan Yook Chin & Anor [2003] 2 CLJ 19; [2003] 2 MLJ 97 where the Court of Appeal held as follows: “ ….. an appellate court will not, generally S/N 19vRbMidFUKWwd8bhlTiuw speaking, intervene unless the trial court is shown to be plainly wrong in arriving at its decision. But appellate interference will take place in cases where there has been no or insufficient judicial appreciation of the evidence.” (emphasis added)

In the decision of the Federal Court in Gan Yook Chin & Anor v Lee Ing Chin & Ors [2004] 4 CLJ 309, the Federal Court held that: “[12] In our view, the Court of Appeal in citing these cases had clearly borne in mind the central feature of appellate intervention i.e., to determine whether or not the trial court had arrived at its decision or finding correctly on the basis of the relevant law and/or the established evidence. In so doing, the Court of Appeal was perfectly entitled to examine the process of evaluation of the evidence by the trial court. Clearly, the phrase “insufficient judicial appreciation of evidence” merely related to such a process. This is reflected in the Court of Appeal’s restatement that a judge who was required to adjudicate upon a dispute must arrive at his decision on an issue of fact by assessing, weighing and, for good reasons, either accepting or rejecting the whole or any part of the evidence placed before him. The Court of Appeal further reiterated the principle central to appellate intervention i.e., that a decision arrived at by a trial court without judicial appreciation of the evidence might be set aside on appeal. This is consistent with the established plainly wrong test.” S/N 19vRbMidFUKWwd8bhlTiuw

In the Federal Court case of Ng Hoo Kui & Anor v. Wendy Tan Lee Peng, Administrator of the Estates of Tan Ewe Kwang, Deceased & Ors [2020] 10 CLJ 1, Zabariah Mohd Yusof FCJ delivering the judgment of the court, held inter alia as follows: “(1) An appellate court should not interfere with the trial judge's conclusions on primary facts unless satisfied that he was plainly wrong. The 'plainly wrong' test operates on the principle that the trial court has had the advantage of seeing and hearing the witnesses on their evidence as opposed to the appellate court that acts on the printed records. In the UK, the test adopted by the appellate courts is not whether the higher courts feels that it would have reached a different conclusion on the same fact as the trial court, but whether or not the decision by the lower court on findings of fact was reasonable. If the trial judge's decision can be reasonably explained and justified, then the appellate courts should refrain from intervention. (paras 33, 34 & 60)

Bearing in mind the above principles distilled from the above cases, we will now deal with the Appellant’s appeal.

It is common ground that the Appellant did not deliver vacant possession of the shop Office by 4.6.2015. The Respondent complained that this was a breach of the SPA and the Appellant was liable to pay LAD to the Respondent.

The clause which is the subject matter of the dispute is Clause 13 of the SPA on the “Time and Manner of Delivery of Vacant Possession”, which is reproduced here: "13.1 Delivery of vacant possession 13.1.1 The Developer shall complete and deliver vacant possession of the said Parcel in accordance with the terms and conditions of this Agreement within the period stated in section 10 of Schedule A hereto PROVIDED S/N 19vRbMidFUKWwd8bhlTiuw THAT if in the opinion of the Developer's architect completion or delivery of vacant possession of the said Parcel is delayed by reason of exceptionally inclement weather, civil commotion, strikes, lockout, war, fire, flood or for any other cause beyond the Developer's control or by reason of the Purchaser requiring the execution of any addition, works or alterations to the said Parcel, then in any such cases, the Developer's architect shall make a fair and reasonable extension of time for completion of the said Parcel and delivery of vacant possession hereunder.

13.1.2 In the event the Developer shall fail to complete and deliver vacant possession of the said Parcel to the Purchaser within the aforesaid period or within such extended time as may be allowed by the Developer's architect under Clause 13.1.1 the Developer shall pay to the Purchaser liquidated damages to be calculated from day to day at the Agreed Rate on such part of the Purchase Price that has been paid by the Purchaser to the Developer and such sums shall be calculated from the date of expiry of the period stated in Section 1O of Schedule A hereto or the extended date, as the case may be, to the actual date of delivery of vacant possession of the said Parcel to the Purchaser.

13.1.3 For the avoidance of doubt, any cause of action to claim liquidated damages by the Purchaser under this clause shall accrue on the date the Purchaser takes vacant possession of the said Parcel.

13.2 Manner of vacant possession 13.2.1 Upon issuance of a certificate by the S/N 19vRbMidFUKWwd8bhlTiuw Developer's architect certifying that the construction of the Said Parcel has been duly competed and the Purchaser having paid all monies payable under this Agreement and having performed and observed all terms and conditions on the Purchaser's part under this Agreement, the Developer shall let the Purchaser into possession of the said Parcel PROVIDED ALWAYS THAT such possession shall not give the Purchaser the right to occupy and the Purchaser shall not occupy the said Parcel or to make any alterations additions or otherwise to the said Parcel until such time as the Certificate of Completion and Compliance for the said Parcel is issued.

13.2.2 Upon the expiry of fourteen (14) days from the date of notice from the Developer requesting the Purchaser to take possession of the said Parcel whether or not the Purchaser has actually entered into possession or occupation of the said Parcel, the Purchaser shall be deemed to have taken delivery of vacant possession of the said Parcel and the Developer shall thereafter not be liable for any loss and/or damage to the said Parcel or to the fixtures and fittings therein." (Emphasis Added) WHETHER THE 2ND DEFENDANT’S ARCHITECT’S LETTERS ARE VALID EXTENSIONS OF TIME UNDER THE SPA?

Clause 13.1.1 of the SPA states that the Appellant must deliver vacant possession of Shop Office within 36 months S/N 19vRbMidFUKWwd8bhlTiuw from the date of the Period Approval or the Extended Period Approval ("Specified Period"). The exception to this general rule in the SPA is that, if in the opinion of the Architect, delivery of vacant possession of the Shop Office is delayed by reason of exceptional causes as stated in clause 13.1.1, then, the Architect shall grant a fair and reasonable extension of time in favour of the Appellant.

Clause 13.1.2 of the SPA further states that in the event that the Appellant fails to deliver vacant possession of the Shop Office within the Specified Period (or the extended time allowed by the Architect), the Appellant shall pay to the Respondent, liquidated damages at the rate of 10% of the Purchase Price per annum on daily rests pursuant to the SPA. These liquidated damages would start from the Specified Period to the actual date of delivery of vacant possession of the Shop Office to the Respondent.

Further, according to Clause 25.1 of the SPA, the Appellant shall be responsible for connecting and applying for connection of utilities and services which serves the Shop Office (water, electricity, sewerage, telephone, as piping, sanitary, cooling ducts and so on)', at its own cost and expense.

It is undisputed that the Specified Period in the SPA ends on 4.6.2015. The Appellant's contention is that there were extensions of time granted by the Architect pursuant to Clause 13.1.1 of the SPA by way of the Architect’s Letters which S/N 19vRbMidFUKWwd8bhlTiuw extended the time for the Appellant to deliver vacant possession until 15.1.2016.

Our perusal of the learned High Court Judge's Grounds of Judgment showed that she has considered this issue correctly. This is what she said at paragraphs 175 and 179 of her Grounds of Judgment: "[175] Even a cursory reading of the Architect's Letters will show that they were not extensions of time under the SPA. The Architect's letters:

In making the findings that the Architect's Letters are not the Certificates of Extension of Time, the learned trial Judge also took into consideration of the testimony of PW2, the Appellant's Architect, who testified that the Architect's Letters merely served the purpose of informing the Appellant of the delay of the Project.

As such, we are of the opinion that the Architect's Letters do not qualify as Certificates of Extension of Time which would justify the Appellant’s delay in delivering the vacant possession of the Shop Office to the Respondent.

We also find that the Appellant’s claims that the breaches by S/N 19vRbMidFUKWwd8bhlTiuw their Main Contractor, Sara-Timur Sdn. Bhd. and its application for restructuring pursuant to section 176 of the Companies Act 1965 were events beyond its control to which it was entitled to extensions of time, has no merits. The breaches caused by the Main Contractor's restructuring exercise were not force majeure events and were not beyond the Appellant's control in the Project under Clause 13.1.1 of the SPA; WHEN WAS VACANT POSSESSION OF THE SHOP OFFICE DELIVERED TO THE RESPONDENT?

By a letter dated 28.12.2015, the Architect of the Project who is the 2nd Defendant in the High Court had duly certified that the construction of the Shop Office had been duly completed via the Architect's Certificate and letter dated 28/12/2015 (Enclosure 24 at pages 239-240; RA/2D/892-893).

On 30.12.2015, the Appellant issued a letter informing the Respondent that the Shop Office is ready for delivery of vacant possession, enclosing a certificate of completion from the Architect and that the requirements for vacant possession under Clause 13.2.1 of the SPA have been met.

Pursuant to clause 13.2.2 of the SPA, the Respondent would be deemed to have taken the possession of the Shop Office within 14 days from the date of the letter, which would be 13.1.2016.

The learned High Court Judge found that it is the obligation of the Appellant to ensure the availability of permanent access road, S/N 19vRbMidFUKWwd8bhlTiuw the mains for the electricity supply and the water supply to connect them to the Shop Office (“Essential Amenities”) and the CCC was issued to the Respondent before the Appellant can deliver vacant possession of the Shop Office. This is what she held: "[143] Nevertheless, I was of the view that the words "delivery of vacant possession" in sub clauses 13.1.1 and 13.2.1 of the SPA must be construed to mean delivery of a vacant constructed property that can be occupied either by the plaintiff as the purchaser or the plaintiff's tenant or licensees. [144] I was of this view even though Clause 13.2.1 of the SPA expressly stipulates that upon issuance of the Architect's Certificate, the Defendant/Developer shall let the Plaintiff/Purchaser into possession of the said Property and it was also stated that the delivery of the vacant possession did not give the right for the Plaintiff/Purchaser to occupy the said Property or to make any other alterations until such time as the CCC was issued. [145] In other words, in my view. vacant possession can only be lawfully and validly delivered under the SPA if on the date of the delivery of vacant possession, the 1st defendant had made available to the property, the permanent access road and the mains for the electricity supply and the water supply to enable the plaintiff to connect them to the property ("the essential S/N 19vRbMidFUKWwd8bhlTiuw amenities") and the CCC was issued to certify that all the essential amenities have been completed by the 1st defendant as the developer of the Project." (Emphasis Added) (See: Enclosure 24, page 70)

With respect, we are of the considered view that this finding of the learned High Court Judge is erroneous as the definition of the manner of vacant possession was clearly defined in clause 13.2 of the SPA, which states that upon issuance of a certificate by the Appellant's architect certifying that the construction of the Shop Office has been duly competed, the Purchaser having paid all monies payable under the SPA and having performed and observed all terms and conditions on the Respondent under the SPA, the Appellant shall let the Respondent into possession of the Shop Office however such possession shall not give the Respondent, the right to occupy and the Respondent shall not occupy the Shop Office or to make any alterations additions or otherwise to the said Shop Office until such time as the CCC for the Office Shop is issued.

We are of the considered opinion that the learned High Court Judge is confused about the manner of vacant possession and the issuance of the CCC. Under the SPA, it is clear that they are totally separate events and caters for different situations.

We further find that the learned High Court Judge should not have interpreted the SPA in such a manner that combined the 2 separate and distinct events into a single event when they are not. There is no statutory prohibition against the segregation of these 2 S/N 19vRbMidFUKWwd8bhlTiuw events. The Appellant and the Respondent have voluntarily entered into the SPA and parties have conducted their affairs in accordance with the terms and conditions of the SPA. The sanctity of the contract entered between parties should be preserved.

In so far as the learned High Court Judge’s finding that the CCC procurement and the delivery of vacant possession are very much intertwined as clause 19 of the SPA could not be invoked without the fulfilment of clause 20 and clause 23 of the SPA, we are of the considered view that such a finding is erroneous as in the present case, the SPA makes it distinctly clear that they are not intertwined.

We are of the considered view that the granting of "vacant possession” of the Shop Office without the right to occupation is nothing novel as even in the sale of "housing accommodation", the previous Schedule H of the Housing Development (Control and Licensing) Regulations 1989 (before the amendments vide PU(A) 106/15 which came into force on 1/2/2011) included a clause for vacant possession without according a right to occupation in Clause 27(3) of the statutory Sale and Purchase Agreement as follows: "(3) Such possession shall not give the Purchaser the right to occupy and the Purchaser shall not occupy the said Parcel until such time as the Certificate of Fitness for Occupation for the said Building is issued." S/N 19vRbMidFUKWwd8bhlTiuw

As such, without a right of occupation, the issue of actual electricity and water supply are not relevant and neither does the SPA in this case specified these requirements. There is a clear difference between "occupation" and "possession". Vacant possession is not synonymous with the right of occupation.

Since clause 13.2.1 of the SPA clearly provides for the manner of delivery of vacant possession and which has been complied with, by the Appellant, we are of the considered view that delivery of vacant possession to the Respondent was on 30/12/2015 as per the Appellant’s letter bearing the same date.

Our considered view is that there is merit in that the Appellant’s contention that Clause 13 of the SPA merely requires the Appellant to physically complete works and provide a certificate of practical completion by the Architect as sufficient to provide vacant possession and that it would matter not, if the Shop Office was not connected with the Essential Utilities. WHETHER THE RESPONDENT NEEDED TO PROVE DAMAGES?

The Appellant contended that the learned High Court Judge erred in awarding the LAD as it was not proven by the Respondent.

Whether the damage is quantifiable or otherwise, the court has to adopt a common sense approach by taking into account the genuine interest which an innocent party may have and the proportionality of a damages clause in determining reasonable compensation. S/N 19vRbMidFUKWwd8bhlTiuw

Section 75 of the Contracts Act, 1950 provides that reasonable compensation must not exceed the amount so named in the contract. Consequently, the impugned clause that the innocent party seeks to uphold would function as a cap on the maximum recoverable amount.

Guidance can be found in the Federal Court’s decision in Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 2 CLJ 723, where Richard Malanjum (CJ (Sabah & Sarawak) as he then was”) held inter alia as follows: “[70] We turn now to the issue on burden of proof. The initial onus lies on the party seeking to enforce a clause under s. 75 of the Act to adduce evidence that firstly, there was a breach of contract and that secondly, the contract contains a clause specifying a sum to be paid upon breach. Once these two elements have been established, the innocent party is entitled to receive a sum not exceeding the amount stipulated in the contract irrespective of whether actual damage or loss is proven, subject always to the defaulting party proving the unreasonableness of the damages clause including the sum stated therein, if any. [71] If there is a dispute as to what constitutes reasonable compensation, the burden of proof falls on the defaulting party to show that the damages clause is unreasonable or to demonstrate from available evidence and under such circumstances what comprises reasonable compensation caused by the breach of contract. Failing to discharge that burden, or in the absence of cogent evidence suggesting exorbitance or unconscionability of the agreed damages clause, the parties who have equality of opportunity for S/N 19vRbMidFUKWwd8bhlTiuw understanding and insisting upon their rights must be taken to have freely, deliberately and mutually consented to the contractual clause seeking to pre-allocate damages and hence the compensation stipulated in the contract ought to be upheld. [72] It bears repeating that the court should be slow to refuse to give effect to a damages clause for contracts which are the result of thorough negotiations made at arm's length between parties who have been properly advised. … [73] At any rate, to insist that the innocent party bears the burden of proof to show that an impugned clause is not excessive would undermine the purpose of having a damages clause in a contract, which is to promote business efficacy and minimise litigation between the parties (see: Scottish Law Commission, Discussion Paper on Penalty Clauses (Discussion Paper No 103), December 1997, paras. [5.30]-[5.40]). [74] In summary and for convenience, the principles that may be distilled from hereinabove are these:

(i) If there is a breach of contract, any money paid in advance of performance and as part-payment of the contract price is generally recoverable by the payer. But a deposit paid which is not merely part-payment but also as a guarantee of performance is generally not recoverable.

(v) A sum payable on breach of contract will be held to be unreasonable compensation if it is extravagant and unconscionable in amount in comparison with the highest conceivable loss which could possibly flow from the breach. In the absence of proper justification, there should not be a significant difference between the level of damages spelt out in the contract and the level of loss or damage which is likely to be suffered by the innocent party.

From the evidence adduced, we are of the view that the Respondent has successfully discharged its burden of proof, firstly, that was a breach of contract and that secondly, the SPA contains a clause specifying a sum to be paid upon breach which is clause 13.1.2 of the SPA read with Section 7 of Schedule A of the SPA. See: Cubic Electronics Sdn Bhd (in liquidation) v Mars Telecommunications Sdn Bhd [2019] 2 CLJ 723

We find that there are no merits in this contention as the learned High Court Judge was correctly relying on the cases of Selva Kumar all Murugiah v Thiagamjah all Retnasamy [1995] 1 MLJ 817 and Sakinas Sdn Bhd v Siew Yik Hau [2002] 5 MLJ 497 when determining that the proof of LAD was not required;

In the present case, under the SPA, the agreed rate of LAD is 10% per annum of the purchase price of the Shop Office, which is similar to the rate of liquidated damages awarded in statutorily prescribed sale and purchase agreements such as