PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor and other appeals [2021] 2 MLJ 60

Federal Court Putrajaya

(Illegality of booking fees under HDA)

• Dispute between developers of 3 housing projects and the buyers on payment of Late Ascertain Damages (“LAD”) for late delivery of vacant possession.

• All SPAs followed the statutory contract of sale prescribed in either Schedule G or Schedule H of the Housing Development (Control and Licensing) Regulations 1989 (‘the HDR 1989’) enacted pursuant to s 24 of the Housing Development (Control and Licensing) Act 1966 (‘the HDA’).

• Statutory contracts provided for vacant possession to be delivered to the buyer within a specified period ‘from the date of this Agreement’.

• Buyers contended that the calculation for LAD commenced from the date the booking was paid.

• Developers argue that the agreement should be interpreted literally to commence from the date of the agreement.

• Consists of 7 appeals, heard together under a common point of law.

Interpretation of the HDR 1989 and the HDA

• The HDA and its subsidiary legislation are social legislation.

• A social legislation is a legal term for a specific set of laws passed by the legislature for the purpose of regulating the relationship between a weaker class of persons and a stronger class of persons. Given that one side always has the upper hand against the other due to the inequality of bargaining power, the state is compelled to intervene to balance the scales of justice by providing certain statutory safeguards for that weaker class.

• In interpreting social legislation, the State having statutorily intervened, the courts had to give effect to the intention of Parliament and not to the intention of the parties. Otherwise, the Legislature’s attempt to level the playing field by mitigating the inequality in bargaining power would be rendered nugatory and illusory.

• The intention of Parliament is unequivocal. From the Hansard in 1966, to the change in the subsidiary legislation up to the amendment to the HDR 1989 in 2015, the written law in force has made it crystal clear that the collection of booking fees is to be absolutely prohibited.

The legal effect of booking fees illegality

• Developers who collect booking fees do so in express contravention of reg 11(2) of the HDR 1989.  It is possible for any reasonable person to conclude that the developers have committed an offence under reg 13(1) of the HDR 1989. Further, solicitors or anyone else who have collected the fees as stakeholders or who have advised or encouraged the developers to do so have similarly committed an offence under reg 13(3).

• The fact that a particular course of conduct may attract penal sanctions is not in itself a sufficient ground to suggest that an agreement made in contravention of that very act is void for illegality unless Parliament clearly intended, whether expressly or impliedly, that such agreements be rendered void as such.

• This is an instance whereby one party to the contracts namely the developers, have committed an illegal act in securing the contracts. Thus, it is not the contracts per se that are illegal rather it is their performance which has violated the strict terms of reg 11(2) of the HDR 1989 and the Schedules to the scheduled contracts.

• When it concerns social legislation and the stronger side to the transaction has committed an illegal act, the existence of a penal provision does not automatically render the contract void. Accordingly, in such cases, the weaker party to the transaction will not be deemed to be in pari delicto and shall accordingly be entitled to the appropriate remedy. The natural result of this is that the stronger party will have that illegality construed against them. The result of that exercise depends very much on the facts of a particular case.

Contract made at the time booking was paid

• Having bound themselves to a bargain by collecting the booking fees and procuring a signed pro forma and top of it being responsible for drafting the final formal agreement, the developers have thereby put the purchasers in a disadvantageous position. The problem this poses is that the developers may abuse the opportunity to put whichever date they wish with a view to extend the date to deliver vacant possession.

• The fact that they have nonetheless bypassed the statutory prohibition against the collection of booking fees, and the pro forma agreements being amply clear as to the fundamentals of the agreement, means that a bargain was indeed made at the time of the payment of the booking fee. The legislative intent that the initial payment of monies, in the form of a deposit, is sufficient to constitute an intention to enter into a contract given that the agreement would have to be signed at the same time.

• Where there is a delay in the delivery of vacant possession by a developer to the purchaser in respect of Scheduled Contracts under Regulation 11(1) of the Housing Development (Control and Licensing) Regulations 1989 (Regulation 1989) enacted pursuant to Section 24 of the Housing Development (Control and Licensing) Act 1966, the date for calculation of liquidated agreed damages (‘LAD’) begins from the date of payment of deposit/booking fee/initial fee/expression by the purchaser of his written intention to purchase and not from the date of the sale and purchase agreement literally.

• We cannot apply the literal rule to arrive at the simplistic conclusion that the date of calculation of the LAD runs from the date printed in the scheduled contract. Our reluctance to do so does not mean that we are ‘rewriting’ the bargain between the parties, instead we are construing the scheduled contract in accordance with the statutory protections afforded by parliament.

• Where this illegal practice of booking fee is afoot, the date of the contract cannot be taken to mean the date printed in the scheduled contracts. Otherwise, this court would be condoning the developers’ attempt in this case to bypass the statutory protections afforded to the purchaser by the legislative scheme put in place.

• In construing the illegality against the developers, if it is their attempt to have secured an early bargain through the illegal collection of booking fees, then the protective veil cast by the legislature over the purchasers should operate in a way so as to bind the developers to the booking fees. In this way, the developers will have to bear the full extent of the LAD payable by them to the purchasers consistent with the overall intent of the written law in respect of late delivery of vacant possession.

• While the developers believed that it was standard practice to accept booking fees, the development of the law clearly suggested to the contrary. The courts would not condone such a practice until and unless the law provided otherwise.

• Although developers, solicitors or anyone else who collected booking fees from house buyers expressly contravened reg 11(2) of the HDR 1989 and thereby committed offences under either reg 13(1) or 13(3), as the case might be, that did not render the agreements ex facie illegal as the same were based on statutory contracts.

• The statutory contracts now required that 10% of the purchase price be paid upon the signing of the SPA and if that provision was strictly complied with, there would be no question of whether LAD should be calculated from the date stated on the SPA or the date of payment of the booking fee.

• On a proper construction of the pro forma document and grounded on trite principles of contract law, a valid contract was already formed upon they payment of the booking fees. The subsequent signing of a sale and purchase agreement was merely a formality.

• In disputes between home buyers and housing developers, its significance lies in the approach taken by the courts to tip the scales of justice in favour of the home buyers given the disparity in bargaining power between them and the housing developers.