Icon City Development Sdn Bhd (formerly known as Sierra Peninsular Development Sdn Bhd) v LKHO [2025] 6 MLJ 901

Federal Court (Putrajaya) 

Contract — Agreement — Sale and purchase of property — Late delivery of vacant possession

1. The Respondents were purchasers of stratified mixed commercial units and residential units in a development undertaken by the Appellant as the developer. Each Respondent entered into a sale and purchase agreement (“SPA”) with the Appellant.
2. Under clause 35A of the SPA, the Appellant was required to obtain conversion approval and approval of the building plans within 12 months from the date of the SPA, subject to a further 6 months extension (“the approval period” or “extended approval period”).
3. Section 10 of Schedule A of SPA provided that delivery of vacant possession was to be within 42 calendar months from the date of the approval period or the extended approval period.
4. The conversion approval was obtained on 17 January 2012, and the first approval of the building plans was obtained on 2 August 2012, both within the original approval period. Subsequent amendments to the building plans were approved in November 2015.
5. Vacant possession was delivered in September and October 2016. The Respondents commenced summary judgment proceedings claiming liquidated damages for late delivery, contending that the 42 months period commenced on 2 August 2012. The Appellant contended that the period should instead run either from the expiry of the approval period or from the date of the last amended building plan approval.
6. The High Court granted summary judgment. The Court of Appeal dismissed the appeal. Leave was granted to the Federal Court on two questions of law.

1. Whether, in a sale and purchase contract for commercial property, where the time for delivery of vacant possession is to be calculated from a date within a stipulated approval period, the calculation ought to begin from the expiry of that period, rather than from the date on which the relevant approval was obtained within the period?
2. Whether, where “building plans” are defined to include “any and all amendments, alterations and modifications”, the time for delivery of vacant possession ought to be calculated from the date of the first/original approval of the building plans or from the date of the last amended approval, subject to the prescribed period?

(1)  Whether, in a sale and purchase contract for commercial property, where the time for delivery of vacant possession is to be calculated from a date within a stipulated approval period, the calculation ought to begin from the expiry of that period, rather than from the date on which the relevant approval was obtained within the period?

(2)  Whether, where “building plans” are defined to include “any and all amendments, alterations and modifications”, the time for delivery of vacant possession ought to be calculated from the date of the first/original approval of the building plans or from the date of the last amended approval, subject to the prescribed period?

(a) The Federal Court answered Issues 1 and 2 together.

(b) The Federal Court held that, on a proper construction of section 10 of Schedule A read together with clause 35A of the SPA, the 42 month period for delivery of vacant possession commenced from the actual date on which the relevant approval was obtained within the approval period and not from the expiry of that period.

(c)  The Court held that the phrase “the date of the approval period” referred to a date falling within the approval period and that to construe it as meaning the expiry of the period would involve adding words to the contract which were not there. Such a construction was inconsistent with the plain language of the clause and commercially unsustainable as construction could commence upon approval being granted (paras 41–45, 48–49).

(d) The Federal Court further held that the Appellant’s contention that time should only begin to run upon expiry of the approval period would defeat the contractual allocation of risk and undermine certainty in commercial transactions. Where approval was in fact obtained within the stipulated period, there was no contractual or commercial justification for deferring the commencement of time beyond the date of approval.

(e)  As to the second question, the Federal Court rejected the Appellant’s argument that the definition of “building plans”, which included amendments and modifications, required the delivery timeline to be calculated from the date of the last amended approval. The Court held that contractual definitions must yield to context, and that the qualifying words “where the context so admits” prevented a literal application of the definition where it would produce an unworkable or commercially absurd result.

(f)   The Court observed that adopting the Appellant’s construction would result in the delivery timeline becoming a moving or shifting target, capable of being repeatedly extended by subsequent amendments to the building plans. Such an interpretation was inconsistent with business common sense and with clause 38.16 of the SPA, which made time of the essence (paras 53,58).

(g) Applying a contextual and purposive construction, the Federal Court held that the relevant approval for the purpose of calculating the delivery period was the first approval of the building plans, being the approval that enabled construction to commence. Subsequent amendments did not reset or defer the contractual timeline for delivery of vacant possession (paras 68, 72).

(h)  Accordingly, the Federal Court held that the Respondents’ calculation of liquidated damages based on the first building plan approval obtained within the approval period was correct and the Appellant’s alternative constructions were rejected.

1. The Federal Court dismissed the appeal, affirming the decisions of the High Court and the Court of Appeal. The Respondents were entitled to liquidated damages for late delivery of vacant possession.

1. Where time for delivery is pegged to an approval obtained within a stipulated period, time runs from the date of approval, not from the expiry of the period.
2. Definitions in a commercial contract must be applied contextually and will not be construed to produce uncertain or manipulable timelines.
3. Amendments to building plans do not, without clear contractual language, reset the contractual timeline for delivery of vacant possession.