INTRODUCTION

The housing development in Malaysia is principally governed by the Housing Development (Control & Licensing) Act 1966 (“HDA”). One of the objectives of the HDA is to protect the interest of the purchasers of housing development as enumerated in the preamble of the HDA:-

 “ An Act to provide for the control and licensing of the business of housing development in Peninsular Malaysia, the protection of the interest of purchasers and for matters connected therewith.” (“the Objective”)

To achieve the Objective, the Minister is empowered under Section 24 of HDA to make a regulation to, inter alia, prescribe a standardised Sales and Purchase Agreement (“SPA”) to be adopted in all Housing Development and to regulate and prohibit the conditions and terms of the SPA.

Pursuant thereto, the Minister had gazetted the Housing Development (Control and Licensing) Regulation 1989 (“The Regulation”) which provides, inter alia, that:-

i) The Housing Developers shall deliver vacant possession (“VP”) of the property to the purchaser within 36 months (Schedule H – for high rise housing development) and 24 months (Schedule G – for landed housing development) respectively; and

[Regulation 11(1) of the Regulation]

ii) The Controller is empowered to waive or modify the terms of the statutorily prescribed purchase and sale agreements.

[Regulation 11(3) of the Regulation]

Recently, the exercising of power by the Controller, specifically the power to grant an extension of time for the delivery of vacant possession, was called into question and the issue was canvassed by the Federal Court in the case of Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan Dan Kerajaan Tempatan & Anor and Other Appeals [2019] 1 LNS 1741; [2019] MLJU 1346. 

BACKGROUNDS FACTS

The facts of the cases may be succinctly summarised as follows:-

1) The Developer and Purchasers entered into the respective Sale and Purchase Agreements (“SPAs”) whereby it was agreed that the delivery of vacant possession (“VP”) of the units shall be thirty-six (36) months from the date of SPAs.

2) The SPAs were the statutorily prescribed form under Schedule H;

3) After the execution of SPAs, the Developer applied for an extension of time for the delivery of VP to the Controller of Housing (“Controller”) pursuant to Regulation 11(3) of Housing Development Regulation (“HDR”) on the grounds that:-

(i)  complaints by nearby residents due to extended working hours;

(ii) stop-work order issued by authorities; and

(iii) investigation conducted by piling conductor.

4) The Controller rejected the Developer’s application for extension of time.

5) Dissatisfied with the Controller’s decision, the Developer appealed to the Minister pursuant to Regulation 12 of HDR.

6) The Developer’s appeal was purportedly allowed by the Minister and an extension of time of twelve (12) months was granted to the Developer.

7) As a result thereof, the delivery of VP was extended to forty-eight (48) months from the date of the SPA and the purchasers were unable to claim for LAD.

8) Aggrieved by the Minister’s decision, the purchasers filed an application for judicial review against the Minister’s decision.

ISSUE BEFORE THE FEDERAL COURT

The Federal Court had succinctly pointed out the issue as follows:-

[26] Having prescribed the Statutory Form H and the terms and conditions for the contract of sale, the Minister by regulation 11(3) of the Regulations then empowers the Controller to waive or modify the conditions and terms of the contract of sale as prescribed in Schedule H. This begs the question whether by empowering the Controller to waive or modify the conditions and terms of the contract, the Minister has exceeded the scope of the authority conferred on him by the legislature? In other words, by empowering the Controller, through regulation 11(3), has there been an act of sub-delegation by the Minister to the Controller which is ultra vires the Act?

DECISION OF FEDERAL COURT

Having considered the parties’ contention and canvassed a plethora of authorities, the Federal Court first turned to the wording of Section 24(2)(e). For ease of reference, Section 24 of HDA is reproduced herein below:-

Section 24(2)(e) of HDA

(1) Subject to this section, the Minister may make regulations for the purpose of carrying into effect the provisions of this Act.

(2) In particular and without prejudice to the generality of the foregoing power, the regulations may-

(e) regulate and prohibit the conditions and terms of any contract between a licensed housing developer, his agent or nominee and his purchaser;

 The Federal Court remarked that the express wording of Section 24(2)(e) of HDA only empowers the Minister to regulate and prohibit the terms and conditions of the SPA. The Federal Court continued to observe that in the absence of any express terms in the Act, the Minister shall not sub-delegate the power to the Controller.

[36] By section 24(2)(e) of the Act, the Minister is empowered or given the discretion by Parliament to regulate and prohibit the terms and conditions of the contract of sale. As opined by the learned authors in De Smith’s Judicial Review, a discretion conferred by statute is prima facie intended to be exercised by the authority on which the statute has conferred it and by no other authority, but the presumption may be rebutted, by any contrary indication found in the language, scope or object of the Act. In our view, having regard to the object and purpose of the Act, the words “to regulate and to prohibit” in subsection 24(2)(e) should be given a strict construction, in the sense that the Minister is expected to apply his own mind to the matter and not to delegate that responsibility to the Controller.

 …

[40] The Act being a social legislation designed to protect the house buyers, the interests of the purchasers shall be the paramount consideration against the developer. Parliament has entrusted the Minister to safeguard the interests of the purchasers and the Minister has prescribed the terms and conditions of the contract of sale as per Schedule H. We find no contrary indication in the language, scope or object of the Act that such duty to safeguard the interests of the purchasers may be delegated to some other authority.

[emphasis added]

Having said the above, the Federal Court then turns to the wording of Regulation 11 and Regulation 12. For ease of reference, Regulation 11(3) and Regulation 12 are reproduced hereinbelow:-

Regulation 11(3) of Housing Development (Control and Licensing) Regulation 1989

 

(3) Where the Controller is satisfied that owing to special circumstances or hardship or necessity compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive or modify such provisions…

 

Regulation 12 of Housing Development (Control and Licensing) Regulation 1989

 

 “Notwithstanding anything to the contrary in these Regulations, any person aggrieved by the decision of the Controller … may within fourteen (14) days after been notified of the decision of the Controller, appeal against such decision to the Minister; and the decision of the Minister made thereon shall be final and shall not be questioned in any court.”.

 The Federal Court pointed out that by virtue of Regulation 11(3), the Minister had sub-delegated the power to regulate to the Controller. As the enabling act, the HAD, does not confer the Minister the power to delegate, the Federal Court ruled that the Minister’s delegation of power to the Controller to regulate, viz-a-viz the Regulation 11(3) is ultra vires:-  

[51] Similarly here. It is the Minister who is entrusted or empowered by Parliament to regulate the terms and conditions of the contract of sale. The Minister, however has delegated the power to regulate to the Controller by regulation 11(3) of the Regulations. As power to regulate does not include power to delegate, the Minister’s action in delegating the power to modify the conditions and terms of the contract of sale may be construed as having exceeded what was intended by Parliament.

…

 [60] On the above analysis, we hold that the Controller has no power to waive or modify any provision in the Schedule H contract of sale because section 24 of the Act does not confer power on the Minister to make regulations for the purpose of delegating the power to waive or modify the Schedule H contract of sale to the Controller. And it is not open to us to read into the section an implied power enabling the Minister to do so. We consequently hold that regulation 11(3) of the Regulations, conferring power on the Controller to waive and modify the terms and conditions of the contract of sale is ultra vires the Act.

EFFECT OF THE DECISION

The Federal Court decision has far-reaching implications and raises enthralling issues of LAD claims.

It appears that NOT ONLY the extension of time granted by the Controller during the construction of the housing development AFTER the execution of SPA is ultra vires, BUT all extended time to deliver vacant possession beyond the prescribed 24 months (Schedule G) and/or 36 months (Schedule H) issued by the Controller BEFORE the execution of SPA would be caught by this Federal Court decision as well if Regulation 11(3) is ultra vires per se.

In the circumstances, would the extension of time to deliver vacant possession approved by the Controller BEFORE the execution of SPA be seen as inconsistent with the Schedule H and/or Schedule G (as the case may be) and effectively void in the light of the Federal Court’s previous decision in the case of Sea Housing Corporation Sdn Bhd v Lee Poh Choo [1982] 2 MLJ 31 (“Sea Housing Corporation”) which held that any clause “being inconsistent with rule 12 and not designed to comply with the requirements of the rules and in the absence of waiver or modification by the Controller of Housing under rule 12(2), is void’?”

Pertinently, it should be noted that the Federal Court is silent as to whether the Ang Ming Lee’s decision applies prospectively or retrospectively, bearing in mind that the Federal Court had in the present case appeared to have departed from its previous decision in Sea Housing Corporation where the Federal Court recognised the validity of Rule 12 (which is now repealed and is similar with Regulation 11(3) of the Regulation):-

“The construction we place on the rules is not as harsh as it seems to a developer — for he has a safeguard in subrule (2) of rule 12 which provides:

 

“Notwithstanding the provisions of paragraph (1) of this Rule, where the Controller [of Housing] is satisfied that owing to special circumstances the compliance with any provisions of this Rule is impracticable or unnecessary he may by a certificate in writing waive or modify such provisions in respect of any contract of sale.”

 

Thus in the circumstances of this case it would have been open to the developer to try and persuade the Controller to modify the rigours of paragraphs (o) and (r) of rule 12(1). If it had succeeded it would have escaped liability…”

It remains to be seen whether this Federal Court’s new ruling will be given a retroactive bearing, and thereby has made invalid what was valid in the doing?

WHAT’S NEXT?

The Deputy Minister of Kementerian Perumahan dan Kerajaan Tempatan (“KPKT”) had, in the Parliamentary Debates on 02.12.2019, informed that, following the Federal Court decision, the Ministry would not consider any application for EOT pursuant to Regulation 11(3) and Regulation 12.

Moving forward, will the Minister regularise the sub-delegation of power to the Controller, by giving notification in the Gazette pursuant to Section 5 of Delegation of Powers Act 1956, and thus bringing the sub-delegation of power to the Controller intra vires? If so, could the Minister then ratify the Extension of Time granted, pursuant to Section 7 of Delegation of Powers Act 1956? These are nagging questions for which only a determination by court would put the matter to rest.