Contributed by Gregory Das

The recently announced National Economic Recovery Plan (Penjana) is aimed at reviving many parts of the economy. The property sector is within the scope of the plan. If successful, the plan would stimulate sales and instil some much-needed stability and normality in the local housing market. 

A return to normality would also mean a reintroduction of the common complications faced between developers and purchasers of housing units. 

A common complaint of purchasers is the existence of alleged discrepancies in the design of a housing unit when compared against the terms of the Sale and Purchase Agreement (SPA). 

The Court of Appeal in a recent judgment held that monetary compensation for such discrepancies would only be payable where there is clear evidence of loss sustained by the purchaser. This was in the Kemajuan Masteron Sdn Bhd vs Chong Nge Wei case.

In the case, the purchasers of apartment units filed a suit for late delivery of vacant possession and compensation for the developer’s use of building material that was different from what was specified in the SPA. The purchasers succeeded in their claims. The High Court ordered that the amount in compensation due to them was to be assessed in separate proceedings before a registrar of the High Court. 

In the assessment proceedings, the registrar was satisfied that damages had been proven for the design discrepancies and ordered that RM380,500 be paid to the purchasers. The developer’s appeal to a High Court judge was dismissed. 

However, the Court of Appeal set aside the decisions of the registrar and High Court judge. It decided that the purchasers had failed to prove their losses from the discrepancies in the design of the units. In so doing, the Court of Appeal made several important remarks on proving losses from design discrepancies. 

First, the Court of Appeal observed that the purchasers did not claim for a reduction in the purchase price of the subject property due to the change in the building material used. 

This resulted in the inference “that the change did not have any adverse effect, not even a reduction in the value or the purchase price of the subject property. 

“More so, when one appreciates the type of properties purchased by the respondents. The respondents are owners of six different units of a 10-storey block of apartments... Each of them owns and occupies their respective units together with other owners who… are not claimants, and who may very well have no issue with the changed external wall. 

“And, from what we can see, the necessary certificates of fitness for occupation must have been issued even with the changed materials, as the respondents have all already gone into occupation”.

Next, the Court of Appeal refused to accept that a quotation for renovation works due to the design discrepancies proved the purchasers’ losses. It was held that the quotation “remained very much a quotation. No repairs or replacement had been carried out…certainly, none that may be discerned from the quotation itself”.

It was also decided that there was “no explanation forthcoming from the respondents as to why the repairs or construction of the external wall with the ‘original’ materials were not undertaken after judgment had been entered, and the quotation procured, almost five years earlier”.

The Court of Appeal decision demonstrates the importance of purchasers proving their losses from changes in the design of a housing unit by a developer. Compensation for such changes does not arise automatically. A mere quotation for renovation works, without those works being performed, is not enough. Neither is it sufficient for complaints to be unsupported by claims for a reduction in the value of the property.

Gregory Das is a practising dispute resolution lawyer in Kuala Lumpur and is familiar with housing development disputes.

Disclaimer

This article is intended to convey general information only. It does not constitute legal or other advice or the provision of legal or other professional services, and shall not be relied upon as such.

This article cannot disclose all of the risks and other factors necessary to evaluate a particular situation. Any interested party should study each situation carefully. You should seek and obtain independent professional advice for your specific needs and situation.