MERCHANT SYNERGY SDN BHD NUJAIMAH BINTI SAFIE

BA-11BNCvC-4-01/2021 Kand. 13 14/06/2022 10:33:18 THE HIGH COURT OF MALAYA AT SHAH ALAM IN THE STATE OF SELANGOR, MALAYSIA CIVIL APPEAL NO: BA-11BNCVC-4-01/2021 BETWEEN MERCHANT SYNERGY SDN BHD … APPELLANT AND NUJAIMAH BINTI SAFIE … RESPONDENT JUDGEMENT [1] This present appeal before me arose from the decision given by the Magistrate’s Court on 14.01.2021 in allowing the Respondent’s Claim for liquidated and ascertained damages (LAD) for late delivery of vacant possession against the Appellant. 1 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal [2] The appeal was heard on 26.01.2022. Upon review of the Record of Appeal, the judgment of the lower Court and the submissions of counsel for both parties, this Court on 11.03.2022 allowed the appeal with costs. [3] Dissatisfied with my above decision, the Respondents/Plaintiffs duly file their application for leave to appeal to the Court of Appeal on 09.04.2022. [4] The following are my grounds of judgment. For purposes of convenience the parties herein shall be referred to in their original capacity in the Magistrate’s Court. Brief Facts [5] On 24.12.2012, the Plaintiff and the Defendant entered into a “Construction Agreement”. Pursuant to Clause 5 of the “Construction Agreement” dated 24.12.2012 (hereinafter referred to as the “Agreement”): - 2 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal i. the Defendant agreed to design, construct and complete the construction of a bungalow house (hereinafter referred to as the “House”) on the Land concerned, in accordance with the specifications, and the building plan (hereinafter referred to as the “Building Plan”), in Appendix B attached thereto; and ii. to obtain the necessary approval from the relevant authority for the said Building Plan and for the construction of the House; iii. The Plaintiff agreed to pay the Defendant a construction price of RM 295,000.00 (hereinafter referred to as the “Construction Price”) at the time and in the manner as stated therein. [6] Clause 5 of the Construction Agreement also stipulates that vacant possession of the House, where water and electricity supply is ready for connection, shall be handed over to the plaintiff within twenty- four (24) months from the date of the Construction Agreement, or from the Date of Approval The Building Plan, whichever is later (“Vacant Possession Date”); in the event of failure to do so, the 3 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Defendant shall pay to the Plaintiff liquidated ascertained damages (LAD) to the Plaintiff calculated on a daily basis day at the rate of eight percent (8%) per annum of the said Building Price from the Date of Vacant Possession until the completion of the House and the surrender of vacant possession to the Plaintiff. [7] The Building Plan was approved by Majlis Perbandaran Nilai on 14.07.2014 (hereinafter referred to as the “Plan Approval Date”), and given that the Approval Date is later than the Building Agreement Date, vacant possession of the House shall be surrendered by the Defendant to the Plaintiff on or before 13.07.2016 (i.e. twenty months (24) months from the Plan Approval Date pursuant to Clause 5 of the said Construction Agreement. [8] As of 30.11.2019, the Defendant still failed to provide the notice of vacant possession to the Plaintiff and it continues to this day. [9] The Plaintiff then commenced legal proceedings against the Defendant claiming for the following: - 4 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal a. a declaration that the Defendant was late in surrendering vacant possession of the House for 1,236 days; and b. pursuant to Clause 5 of the Construction Agreement, the Defendant shall pay to the Plaintiff LAD in the sum of RM 79,916.70. The Defendant’s appeal [10] In pursuing the appeal, the Defendant’s contended that: (i) The learned Magistrate did not address the issues to be tried put before the Court; (ii) That the learned Magistrate only picked out part of the issues to be tried and found that since there was no requirement in Clause 5 of the Agreement to ensure actual supply of water and electricity, the Defendant’s reliance on Section 68 of the Contracts Act 1950 is misplaced; 5 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal (iii) That the learned Magistrate failed to consider the meaning of “vacant possession” as intended under Clause 5, 8 and 11 of the Agreement; and (iv) That the learned Magistrate erred when she said that the Defendant ought to have brought Bandar Akademia into the suit as a third party for purposes of seeking indemnity and contribution of any sum payable by the Defendant to the Plaintiff, notwithstanding the fact that there is no nexus or privity of contract between the Defendant and Bandar Akademia. Plaintiff’s Submission [11] The essence of the Plaintiff’s submission are as follows: (i) The Defendant had breached Clause 5 of the Agreement for failing to hand over vacant possession of the House to the 6 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Plaintiff (complete with water and electricity) within twenty months (24) months from the date of the Agreement; (ii) The Defendant’s defence that there was failure to apply for the certificate of completion and compliance (“CCC”) was not substantiated; and (iii) The Defendant failed to call witnesses in particular the architect concerned to support their defence that they cannot apply for the CCC. The Plaintiff therefore relies on the presumption of adverse inference under Section 114 illustration (g) of the Evidence Act 1948. [12] Premised on the above, the Plaintiff therefore concludes that she has on the balance of probabilities proven her claim and is therefore entitle to damages for breach of contract pursuant to Section 74 of the Contracts Act 1950. In this regard there was no error by the learned Magistrate in arriving to her decision. 7 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Court’s Analysis and Findings [13] Having reviewed the grounds of judgment of the learned Magistrate, the issues on which her grounds of her decision are premised upon are as follows: (i) Whether there was a breach of the Agreement by the Defendant when the Defendant failed to surrender the vacant possession of the house; (ii) Whether the Defendant's failure to surrender vacant possession was due to the Plaintiff and Bandar Akademia; and (iii) Whether the Plaintiff is entitled to LAD as claimed. [14] Whilst the above issues to be tried are not as per the Issues to Be Tried as agreed by parties (see pages 114-116 of the Rekod Rayuan Jilid 1) which lists out eight (8) issues to be tried, I take the view that as long as the trial Court had considered the issue of the 8 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal handing over vacant possession, the rest of the issues listed are just supplementary issues. Unfortunately, despite getting the main issue to be tried correct, I am of the view that the learned Magistrate had erred in her deliberation on the issue of vacant possession. In this regard, instead of zooming in on the time lines as to when vacant possession is to be delivered, the learned Magistrate ought to have taken into consideration the following issues related to delivery of vacant possession namely: (i) What is the meaning of the term “delivery of vacant possession”. Is it the mere delivery of the constructed House sufficient or is to be complete with water and electricity? (ii) Whether the Defendant is obligated to deliver vacant possession at all costs without taking into account the legal pre-requisites applicable including the CCC before doing so? [15] Looking at the grounds of judgment, I can safely surmise that the learned Magistrate’s decision was very much persuaded by case laws concerning LAD claim’s under Schedule H of Housing Developers (Control and Licensing) Rules 1970 (see Southville City 9 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Sdn Bhd v Ng Poh Hwa [2019] 1 LNS 1239 and Salmah Sulaiman v Metroplex Sdn Bhd [1997] 2 CLJ 148). Unfortunately, these decisions are not applicable to the facts of the case before her as firstly, the Defendant herein is not a housing developer. Hence, the Agreement between both the Plaintiff and the Defendant does not come within the purview or scope of the Housing Developers (Control and Licensing) Rules 1970. Secondly, if case laws relating to Schedule H is applicable, the Plaintiff’s claim herein would be premature as LAD can only be calculated upon delivery of vacant possession but not earlier. There is a plethora of authorities on this legal point following the Federal Court decision in the case of Insun Development Sdn Bhd v Azali bin Bakar [1996] 2 MLJ 188. [16] This application of the ratio in Insun Development was well illustrated in the case of Diong Tieow Hong & Anor v Amalan Tepat Sdn Bhd [2008] 3 MLJ 411, where the Court held that: [35] There is certainly no ambiguity nor any condition that the plaintiffs can only claim for LAD after the actual handing over of vacant possession of the property, as suggested by the defendant. This issue has, fortunately, been decided by the 10 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Federal Court in Insun Development Sdn Bhd v Azali bin Bakar [1996] 2 MLJ 188. Concisely put, the Federal Court decided that the purchaser can claim for LAD immediately after the expiry of the contractual deadline for delivery of vacant possession and need not wait for the actual completion of the property.”. (Emphasis added) [17] I will now deliberate at length as to my rationale for allowing the Defendant’s appeal. [18] Under the terms of the Agreement concerned, the House was to be completed within a time line of twenty-four (24) months i.e. on or before 13.07.2016. It is an undisputed fact that based on the Certificate of Practical Completion issued by the Architect for the project, the Defendant had completed construction of the House by 19.04.2016. This was well within the period of twenty-four (24) months. 11 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal [19] Despite the construction of the House being completed well within the twenty-four (24) months period, the Defendant did not deliver vacant possession of it to the Plaintiff. On 26.09.2016 (slightly two (2) months after expire of the twenty-four (24) months period under the Agreement, the Defendant wrote to the Plaintiff informing that they are unable to apply for the CCC as the Surat Sokongan from Syarikat Bekalan Air Negeri Sembilan (SAINS) and Tenaga Nasional Berhad (TNB) was not issued yet. The Defendant also urged the Plaintiff to take steps to ensure that all external infrastructure or services are ready to enable it to apply for the CCC. [20] On 03.09.2018, the Defendant wrote another letter to the Plaintiff informing that they will only hand over the keys (vacant possession) once TNB has supplied electricity to the House and the CCC has been issued. By a subsequent letter dated 09.08.2019, the Defendant wrote to the developer Bandar Akademia and requested for documentation to enable it to apply for the CCC (this letter was copied to the Plaintiff). 12 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal [21] The Plaintiff did not respond to any of the letters sent by the Defendant nor at any point in time indicated that she is willing to accept vacant possession with no supply of the water, electricity or the CCC. [22] As this juncture, it would be appropriate to set out Clause 5 and 8 of the Agreement: Clause 5 ‘Without prejudice to any other right or action or remedies prescribed under this Agreement but subject to any extension of time granted pursuant to Clause 10 hereof, and payment of the full Construction Price by the Owner, vacant possession of the House to which water and electricity supply are ready for connection shall be handed over to the Owner within twenty four (24) months from the date of this Agreement or from date of approval of the Building Plans for the House, whichever the later (“Vacant Possession Date”), failing which the Contractor shall payment to the Owner liquidated damages to be calculated from day to day at the rate of eight percentum (8%) per annum of the Construction Price from the 13 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Vacant Possession Date until completion of the House and vacant possession delivered to the Owner subject to the Owner having paid fully the Progress Payment, costs of alteration or additional and interest to the Contractor.’ Clause 8 ‘(a) Upon issuance of Certificate of Practical Completion by the Architect appointed by the contractor certifying that the House has been duly completed and water and electricity supply is ready for connection to the House and that the Contractor has applied for the issuance of the Certificate of Completion and Compliance from the appropriate authority and the Owner having paid all monies due under this Agreement, the Contractor shall let the Owner into possession of the House, provided that such possession shall not give the Owner the right to to occupy and the Owner shall not occupy the House until such time as the Certificate of Completion and Compliance is issued. 14 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal [23] Under the aforesaid Clause 5, the Contractor (the Defendant herein) must deliver vacant possession of the House to which water and electricity are ready for connection within twenty-four (24) months from the date of the Agreement or from the date of approval of the Building Plans to the House. In the event the Defendant fails to do so, it shall pay to the plaintiff LAD at the rate of eight percent (8%) per annum of the Construction Price calculated from the date of Vacant Possession to the date of actual delivery of the House. [24] Under Clause 8, whilst the Contractor (Defendant) gave possession of the House to the Plaintiff when the Architect has certified that the House is completed and that water and electricity is ready for connection, the Contractor shall not give the Owner the right to occupy the House until such time as the CCC has been issued. [25] Reading both the above provisions together, I can only conclude that the CCC is required before the Plaintiff can occupy the House. The question therefore arises: 15 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Can the Defendant deliver vacant possession or possession of the House as the case may be, without the CCC? [26] In order to answer the above question, the term “vacant possession” warrants a clear definition. As stated earlier, the learned Magistrate failed to deal with this issue in her grounds of judgment. [27] There are a number of authorities on this point. It would suffice for me to state that delivery of ‘vacant possession’ of property does not mean that it is sufficient for the contractor to deliver an empty property of which construction has been completed. The term ‘vacant possession’ extends to delivery of a property capable of being occupied and enjoyed by the purchaser in accordance with statutory provisions applicable to the property. [28] In the case of Atlantic Plantation Sdn Bhd v Mature Land Sdn Bhd [2010] 8 MLJ 477, the Court evaluated and considered what is the meaning of “vacant possession” in the context of sale of landed property. The Court in the case cited above made a reference to the consideration of Kamalanathan Ratnam J in the case Boo Kok 16 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Ngeak & Anor v Lim Kian Hoe & Anor [1998] 6 MLJ 727, where an important reference to the definition of vacant possession as follows: “In Topfell Ltd v Galley Properties Ltd [1979] 1 WLR 446, the court defined vacant possession as a term applied to premises sold or offered for sale and not subject to a lease, where the vendor must give vacant possession on completion, subject to an agreement to the contrary. The court also held that vacant possession meant more than being empty and unoccupied. The property conveyed must be capable of occupation by a purchaser. It is my judgment that the term 'vacant possession' connotes the handing over of lawful and complete possession of a said property to another in a vacant condition and thus capable of occupation and free from any claim of right of possession either by the vendor or any other party.”. [29] In so far as statutory provisions is concerned Section 70 (27) of the Street, Drainage and Building Act 1974 [Act 133] which states as follows: a) ‘(27) Any person who- 17 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal … (f) occupies or permits to be occupied any building or any part thereof without a certificate of completion and compliance shall be liable on conviction to a fine not shall be liable on conviction to a fine not exceeding two hundred and fifty thousand ringgit or to imprisonment for a terminated not exceeding ten years or to both.’ [30] Under Section 3 of the same Act, the CCC is to be issued by a person who is called “the Principal Submitting Person” who must be a qualified person under the Act (in the present case is the supervising architect), who has the duty to certify, through the issuance of the CCC, that the supervised the construction of the House and that it has been built in conformity with the building plans and that the House is safe and fit for occupation (see Sections 70 (20) and 70 (21) of the Act). [31] In so far as this appeal is concerned, it is an undisputed fact that at the point in time the Plaintiff commence legal proceedings, there was no CCC issued for the House. It is also an undisputed fact that 18 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal the letters from the Defendants to the Plaintiffs informing that the Defendant cannot apply for the CCC is attributed to the developer, Bandar Akademia. In addition, the Plaintiff did not adduce any evidence at the trial to contradict or challenge the contents of the Defendants’ letter on the delay by Bandar Akademia. [32] Without Bandar Akademia completing the basic infrastructure (the Plaintiff had contracted with Bandar Akademia on this part), the Defendant cannot apply for CCC nor hand over vacant possession of the House to the Plaintiff. Had the Defendant done so, then a fortiori the Defendant would have committed an offence under the Street, Drainage and Building Act 1974 [Act 133]. Third party proceedings against Bandar Akademia [33] The shortcomings of Bandar Akademia to complete the infrastructure was in fact acknowledged by the learned Magistrate. Unfortunately, she held that the Defendant’s liability was to be based premised on the wordings of Clause 5 of the Agreement which clearly spells out that vacant possession of the House must be 19 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal delivered within twenty-four (24) months from the date of the Agreement or the date the Building Plans were approved by the authorities. In light of the fact that the Defendant was unable to do so as they could procure the CCC, the learned Magistrate found that the Defendant ought to have brought Bandar Akademia in as a third party to seek indemnity or contribution. Whilst, Bandar Akademia should be brought in as a party, it should be by the Plaintiff and not by the Defendant. [34] In absence of any contract or relationship between the Defendant and Bandar Akademia, I am constraint to hold that such finding by the learned Magistrate is clearly wrong. I opine that there are certain recognized relationships that by law or in equity, may give rise to a right to an indemnity. But that is not the case here. [35] In holding so, I am guided by the following authorities: (i) Sime Darby Bhd & Ors v Dato' Seri Ahmad Zubair @ Ahmad Zubir bin Hj Murshid & Ors (Tun Musa Hitam & Ors, third parties) [2012] 9 MLJ 464, as in Halsbury's Laws of England, 20 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal (5th Ed), Vol 49, para 1260 at p 595 lists the following in regard to indemnities as incidents of legal relationships: “A right of indemnity is an incident of certain legal relationships, for example those of agency or employer and employee, where an agent or employee is liable to be indemnified by his principal or employer against liabilities incurred in the reasonable performance of his agency or employment. Rights of indemnity may also arise under principles of equity. In case of breach of trust a trustee may be indemnified out of the interest of a beneficiary who has instigated the breach or be entitled to contribution or indemnity from a co-trustee. A personal representative is entitled to be indemnified out of the estate for his proper expenses. A receiver is ordinarily entitled to be indemnified out of the assets against liabilities properly incurred by him. A director of a company regulated by the Companies Act 1985 is entitled to be indemnified by the company for all debts, expenses and liabilities incurred in the ordinary course of business, and for money borrowed and applied for those purposes.”. 21 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal (ii) the judgment of Lord Wrenbury in Eastern Shipping Co v Quah Beng Kee [1924] AC 177 at p 182 in the Privy Council: “A right to indemnity generally arises from contract express or implied, but it is not confined to cases of contract. A right to indemnity exists where the relation between the parties is such that either in law or in equity there is an obligation upon one party to indemnify the other.”. (Emphasis added.) Section 68 Contracts Act 1950 [36] Lastly, I am in agreement with the Appellant’s submission that the Section 68 of the Contracts Act is applicable to the facts of this appeal in that they were prevented from performing their obligations under the Agreement by the Plaintiff and her agents. 22 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Conclusion [37] In the above premise, the Defendant’s appeal is allowed with costs of RM6000-00 for both the proceedings in the lower Court and for this present appeal. I order so accordingly. Dated 7th June 2022, ………………………………….. (MOHD FIRUZ BIN JAFFRIL) JUDGE HIGH COURT OF SHAH ALAM AT KUALA LUMPUR 23 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal Solicitors for the Plaintiff: Tetuan Au & Jasvinjit, No.36-2, Medan Setia 2, Plaza Damansara, 50490 Kuala Lumpur. No.Tel : 03-20942594 Solicitors for Defendants: Tetuan Normah Desa & Co, A-3-13, Raya Permai, 57100 Sg.Besi, Kuala Lumpur. No.Tel : 013-2895316 24 S/N Gfo5k/v1okKuTFLFgk2YYg **Note : Serial number will be used to verify the originality of this document via eFILING portal