KOPERASI PERMODALAN FELDA MALAYSIA BHD v ICON CITY DEVELOPMENT SDN BHD (dahulunya dikenali sebagai ‘Sierra Peninsular Development Sdn Bhd”) & Anor [2023] MLJU 14

KOPERASI PERMODALAN FELDA MALAYSIA BHD v ICON CITY DEVELOPMENT SDN BHD (dahulunya dikenali sebagai ‘Sierra Peninsular Development Sdn Bhd”) & Anor [2023] MLJU 14

Court of Appeal (Putrajaya)

Liquidated Ascertained Damages for late delivery of vacant possession & Tort of Conspiracy

Facts

1.    The subject matter of the dispute between the parties is regarding the maintenance fees in arrears of an eight (8) units of eight (8) storey shop offices (“the Properties”) as part of the “Icon City Project”.

2.  The Appellant was the purchaser of the Properties while the First Respondent was the Developer, and the Second Respondent was the Project Architect.

3.  The Appellant filed a lawsuit in the High Court against the Respondents as the First Respondent failed to handover the Properties’ vacant possession as provided in the Sale and Purchase Agreements (“SPAs”).

4.  The basis for the Appellant’s claim against the First Respondent is upon the violation of the condition of the SPAs and the tort of conspiracy.

5.  The Appellant’s claim against the Second Respondent is based on conspiracy and negligence for failing to uphold his or her duty of care as the Project’s architect.

6.   Chronologically, the First Respondent is responsible to deliver the vacant possession of the Properties on or before 4 June 2015.  In fact, the First Respondent had issued a letter dated 30 December 2015 to the Appellant notifying the Appellant that the vacant possession of the Properties is available.

7.    Nonetheless, the water connection, electricity connection, and full access road (“Essential Amenities”) were not yet ready at the material time, hence, the Certificate of Completion was ready.

8.   Following that, the Second Respondent sent the First Respondent two letters, referred to as “the Architect’s Letters,” notifying that the original contractual completion date of 4 April 2015 has been moved to 15 January 2016.

9.  The First Respondent claimed that they would not be liable to pay the Liquidated Ascertained Damages (“LAD”) as claimed by the Appellant since reliance are made to the Architect’s Letters to postpone the original completion date of the Properties.

10.   The High Court found for the Respondents and that they are not liable to compensate the Appellants and that the First Respondent’s reliance on the Architect’s Letters for extensions of time was justified.

11.  Therefore, as the High Court found that the Certificate of Completion and Compliance (“CCC”) was validly issued, the Court held that the Respondents did not acted in contravention of the terms of the SPAs.

12.  On the claim under tort of conspiracy, as the Learned High Court judge found that the CCC was validly issued, the High Court held that the Second Respondent did not breach his fiduciary duties.

13.  The High Court also found that the Appellant has failed to fulfil the elements of conspiracy between the two Respondents.

14.  As the Second Respondent’s issuance of extension of time was given reasonably, the Court found that the 2nd Respondent did not breach the duty of care as per the issue of negligence.

15.  The Appellant then filed an appeal at the Court of Appeal after being dissatisfied with the High Court’s ruling.

Issue

1.    Whether the Architect’s Letters prepared is in compliance with the term of extension of time under the SPAs; and

2.    Whether the Appellant’s claim of conspiracy against the Respondents has any merit.

Ratios

1.     The validity of extension of time based on the Architect’s Letters under the SPAs.

(a)  The issue here is concerning the “Time and Manner of Delivery of Vacant Possession, therefore, Clause 13 is reproduced here for clarity –

“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 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 10 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. 

(b)  The Court viewed this differently from the High Court and held that the Second Respondent did not take into account the terms of the SPA when preparing the Architect’s Letter concerning the extension of time.

(c)  The judgement held by the Court are based on the grounds as follows :

“(i) The Architect’s Letters make no mention of the SPAs and specifically Clause 13.1.1 of the SPAs which the 1st Respondent relies heavily upon;

(ii) The Architect’s Letters do not state that in the opinion of the Architect, the events in the said letters were events beyond the Developer’s control or events which fall within any of the grounds in Clause 13.1.1 or were force majeure events; and

(iii) The Architect’s Letters do not state any opinion at all and merely state that there would be delays in the completion of the construction works”

(d)  The Court held that the Architect’s Letters were not validly issued by the Second Respondent, thus, there is no accepted justification for First Respondent to delay the delivery of vacant possession to the Appellant.

(e) Therefore, the Court found that the Respondents breached the term under Clause 13 of the SPAs and are liable for the Liquidated Ascertained Damages (“LAD”).

   2.  Merits of the conspiracy claim

(a)  The Court referred to SCK Group Bhd & Anor v Sunny Liew Siew Pang & Anor [2011] 4 MLJ 393 where the Court of Appeal found that beyond reasonable doubt shall be the standard of proof for conspiracy claim.   The judge held as follows :

 “The tort of conspiracy is not constituted by the conspiratorial agreement alone. For conspiracy to take place, there must also be an unlawful object, or, if not in itself unlawful, it must be brought about by unlawful means.”

(b)  As per the Paragraph 36 of the Statement of Claim which was noted by the Court, the Court held that the Second Respondent was in fact performing his contractual obligations by giving the First Respondent an extension of time.

(c)  It cannot be said that the Second Respondent’s discharge of his contractual obligations as the project architect constitutes “an overt conduct” claimed by the Appellant in pursuit of a conspiracy.

(d)  The evidence of letters between the Appellant, First Respondent and Second Respondent failed to fulfil the elements of conspiracy as the Court found that it is not credible evidence, therefore, constituting that there is nothing equivalent to “an overt conduct”.

Decision 1.    The Court of Appeal allowed the Appellant’s appeal in part where the Court allowed the LAD for late delivery of vacant possession but dismissed the claim for tort of conspiracy.
Key Take Away

1.  LAD means the estimated loss that will occur to a party in the event that the contract is broken by the other party. For any purchase of property from a developer, the right for LAD is as provided in the following clauses:

(a)  Clause 24 under Schedule G of Housing Development (Control & Licencing) Act 1966 (“Act 118”); and

(b)  Clause 25 under Schedule H of Act 118.

2. The above-mentioned schedules prescribed the statutory provisions that govern the purchase of landed and stratified property respectively from a developer.

3.   Following multiple disputes of the start date for calculating the LAD, different views of the Malaysian judges has been settled recently by a landmark case of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Anor [2021] MLRAU 8.  The Court held that the date for calculating the LAD should begin from the date of that the booking fee is paid.

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