JUDGMENT

Lee Hun Hoe CJ (Borneo):

[1] This appeal is against the dismissal by the learned Judge of an appeal from the decision of the Sessions Court, Kota Kinabalu.

[2] Breifly, the appellants are a company incorporated in Malaysia with its registered office at Tingkat 5, Wisma Central, Jalan Ampang, Kuala Lumpur. They are housing developers. One of their ventures was the development of an area of land in Sandakan at Mile 2, Leila Road, Tanah Merah into a commercial and residential complex known as Leila Komplex. The respondents agreed to buy 3 units of flats consting RM703,685 from the appellants and on 1 May 1981 paid a deposit of RM20,000. It was common ground that the deposit was made before the issuance of the Developer's License and the Sale Advertisement Permit on 26 September 1981. The respondents were asked to sign the Sale and Purchase Agreement on 23 May 1981. They did not sign it. Instead, through their solicitors, they claimed for the refund of the deposit on the ground that the deposit was collected illegally under r 10(2) of the Housing (Control and Licensing of Developers) Rules 1980 (herinaftaer referred to as "the Rules"). These Rules were made under the Housing (Control and Licensing of Developers) Enactment 1978 (hereinafter referred to as "the Enactment") on 23 January 1980 and which were gazetted on 15 May 1980 to come in force on 1 July 1980.

[3] The respondents claimed that the payment of the deposit was intended to be a "booking fee". On the other hand the appellants maintained that the deposit was in actual fact part payment towards the purchase price of the three units of flats. They said that the payment was not illegal by reason of or prohibited under the said r 10(2). They counterclaimed for the deposit to be forfeited. Rule 10 reads as follows:

10 (1) A purchaser of housing accommodation including the land shall not be required to pay a booking fee of a sum exceeding 2.5 per centum of the purchase price of such housing accommodation including the land.

(2) Notwithstanding para (1) of this Rule, no purchaser of a housing accommodation including the land shall be required to pay a booking fee of a sum exceeding one thousand ringgit.

(3) For purposes of this Rule the term 'booking fee' shall include any payment by whatever name called which payment gives the purchaser an option or right to purchase the housing accommodation including the land.

[4] The learned President of the Sessions Court held that the deposit was meant to be a booking fee and not part payment. At the time of collecting the deposit the appellants had not as yet obtained the license and permit. Without the proper license they were not authorised to collect deposit. He, therefore, ordered the refund of the deposit and dismissed the counterclaim. In dismissing the appeal the learned Judge stated at p 8 of the Appeal Record:

... Rule 10(1) and 10(2) limits the amount of booking fee which may be collected by a housing developer from a purchaser. Rule 10(3) is clearly enacted to prevent any attempt by a housing developer to contract out of its provisions ........

[5] Having set out r 10(3) the learned Judge went on:

The payment of the deposit in my judgment was caught by the provisions of the above rule. It was not disputed that such payment had given the respondents in this case the option or right to purchase the 3 units of flats. To hold that the deposit was part payment and not booking fee would render its provisions a dead letter and to reinstate the mischief which the rule was designed to remedy.

[6] Before us the same arguments in the lower Courts were used. We agree with the learned Judge that the main issue is really what is the effect of the provisional agreement entered into by the parties before the issuance of the licence to the developers. It is the submission of the appellants that a contract which does not comply with the said Enactment and Rules made thereunder is not invalid and should be enforceable according to its terms The Sin