OBATA-AMBAK HOLDINGS SDN BHD V PREMA BONANZA SDN BHD AND OTHER APPEALS [2024] 5 MLJ 897

Federal Court (Putrajaya)

Contract — Sale and purchase of property (‘SPA’) — Liquidated ascertained damages (‘LAD’)

1. There were 5 appeals all together but for the purposes of this case review only 2 appeals will be discussed.
2. The Appellants, Obata-Ambak Holdings Sdn Bhd (Obata) and Vignesh Naidu A/L Shanmugam (Vignesh), purchased residential units in a high-rise development project known as The Sentral Residences, developed by the Respondent, Prema Bonanza Sdn Bhd (Prema). The project was regulated under the Housing Development (Control and Licensing) Act 1966 and its accompanying Regulations (HDR), which require that all sale and purchase agreements (SPAs) follow the standard form prescribed in Schedule H.
3. Before the SPAs were executed, Prema had applied for and was granted an Extension of Time (EOT) by the Controller of Housing under sub-regulation 11(3) of the HDR. This EOT extended the completion period for the delivery of vacant possession from 36 months to 54 months. The Controller approved the EOT on 16 December 2010, well before the appellants executed their SPAs.
4. Obata signed three SPAs on 24 July 2012, 11 & 18 July 2012, and 28 October 2013. Vignesh signed his SPA on 3 December 2012. Each of these SPAs incorporated the 54-month completion period, as approved by the EOT. Neither Obata nor Vignesh raised any objection to the extended completion period at the time of signing.
5. In 2020, following the Federal Court’s decision in Ang Ming Lee v Menteri Kesejahteraan Bandar, which declared sub-regulation 11(3) ultra vires the Housing Development Act, both Appellants filed separate legal actions. They argued that the EOT was invalid, the developer was bound by the original 36-month period under Schedule H, and claimed liquidated ascertained damages (LAD) for late delivery of vacant possession and common facilities.
6. Obata filed an application for summary judgment under Order 14 of the Rules of Court 2012. The High Court dismissed the application, while allowing Prema’s cross-application under Order 14A to determine points of law. As a result, Obata’s claim was struck out on the ground that it was time-barred. A similar result followed in Vignesh’s case. The Court of Appeal affirmed both decisions, and the Appellants then appealed to the Federal Court.

1. Whether a sale and purchase agreement (SPA) with a 54-month completion period, granted under sub-regulation 11(3) of the HDR (later declared ultra vires), must revert to the 36-month period under Schedule H?
2. Whether the limitation period under paragraph 6(1)(a) of the Limitation Act 1953 begins from the date of SPA execution or from the date of breach or legal invalidation?

(1)  Whether a sale and purchase agreement (SPA) with a 54-month completion period, granted under sub-regulation 11(3) of the HDR (later declared ultra vires), must revert to the 36-month period under Schedule H?

(a) The Federal Court answered this question in the negative, holding that an SPA executed with the extended 54-month period remained valid and binding, even after Ang Ming Lee declared sub-regulation 11(3) ultra vires.

(b) The Court first emphasized that both purchasers, Obata and Vignesh, had full knowledge of the 54-month period when they signed the SPA. They accepted the term and did not raise any objection at the material time –

“Both Obata and Vignesh executed the SPAs with the knowledge that the completion period of the house project was 54 months. They could and should have raised the issue of the validity of the clauses in the SPAs before signing the full and final settlement in 2017, which they failed to do.” (para [96])

(c)  The Federal Court cautioned against parties benefitting from a contract and later challenging its terms –

“If the purchasers had taken the benefit of the agreement and accepted its terms, they cannot approbate and reprobate.” (para [97])

(d) Crucially, the Federal Court invoked the doctrine of prospective overruling, holding that Ang Ming Lee did not have retrospective effect and should not apply to SPAs entered into in good faith before that decision –

“The doctrine of prospective overruling operates to prevent injustice or hardship to parties who may have relied on the previous state of the law.” (para [135])

(e)  Therefore, the Court concluded that past SPAs executed in reliance on sub-regulation 11(3), such as the one signed by Obata, remained enforceable –

“Despite the extension having been declared unlawful in Ang Ming Lee, it should not adversely affect the parties who had relied on that decision or sub-regulation prior to the declaration of invalidity.” (para [136])

(f)   Therefore, the Court held that the 54-month completion period in the SPA was valid, and the parties remained bound by it.

(2)  Whether the limitation period under paragraph 6(1)(a) of the Limitation Act 1953 begins from the date of SPA execution or from the date of breach or legal invalidation?

(a) The Federal Court affirmed that the limitation period begins from the date on which the SPA was executed  i.e., when the cause of action arose and not from the date of later developments like the Ang Ming Lee decision.

(b) The Federal Court applied the basic principle of limitation law –

“Section 6(1) of the Limitation Act 1953 requires a civil claim to be filed before the expiration of six years from the date on which the cause of action accrued — which would be the date the SPA was executed.” (para [86])

(c)  As the SPA in question was executed in 2012–2013 and the suit was only filed in 2020, the Court held it was clearly time-barred –

“A claim for LAD where the cause of action accrued beyond six years before Ang Ming Lee, the claim was time-barred.” (para [86])

(d) The Court also reiterated that the purchasers had every opportunity to raise the issue earlier –

“Obata and Vignesh could and should have raised the issue of the validity of the 54-month period in 2012 or 2013, not in 2020.” (para [87])

(e)  The Court concluded that changes in legal interpretation (like Ang Ming Lee) do not reset the limitation period. The right to sue arises at the moment the cause of action is complete — and from that point, time begins to run under the Limitation Act.

1. The Federal Court dismissed Obata’s appeals (Appeal Nos. 70 and 71), affirming that the claims were time-barred. The Federal Court held that purchasers could not challenge clauses they had agreed to and benefitted from, years after the fact. The doctrine of prospective overruling applied and Ang Ming Lee did not invalidate EOTs granted prior to the decision.

1. Parties are bound by the 54-month completion period stated in the SPA, even if the law allowing it was later struck down.
2. The Ang Ming Lee case does not apply to SPAs signed before that decision.
3. Buyers cannot claim LAD based on the 36-month period if they agreed to 54 months in the contract.
4. The 6-year limitation period starts from the date the SPA was signed, not from later legal changes.