(delivering the judgment of the Court): The plaintiff (respondent before us) wanted to buy a shophouse on lot 25602 1,680 sq. ft. in area in phase 5 in SEA Park, Petaling Jaya, from the defendant who is a licensed developer (appellant before us).

It is common ground that the transaction between the two is governed by the Housing Developers (Control) and Licensing) Act 1966 ("the Act") and the Housing Developers (Control and Licensing) Rules 1970 ("the rules") published as P.U.(A) 268/70.

On January 2, 1974 by a written agreement (AB1) the plaintiff agreed to buy from the defendant the shophouse at the price of $ 175,000. Under the agreement the defendant was to complete the said building within 18 months from the date of the agreement, i.e. on or before July 1, 1975. The plaintiff paid a deposit and paid the rest of the purchase price progressively. In fact the building was not completed until June 16, 1977. It is a term of the said agreement that the defendant should pay liquidated damages at the rate of 8% per annum on the purchase price for any delay in the completion of the said building up to the date of actual completion and delivery of possession.

The following events then happened. By a letter dated June 16, 1977 (AB23) the defendant wrote to the plaintiff notifying her that the building had been completed and the Certificate of Fitness was ready for collection. The defendant asked the plaintiff to pay $ 17,907.20 made up as follows:$ 17,500 being the final instalment of the purchase price and $ 407.20 being quit rent for a period of 4 years.

Upon receipt of the abovementioned letter, the plaintiff replied as in AB26, pointing out to the defendant that under Clause 17 of the agreement the building was to be completed within 18 months, but the said building was completed 23 months and 15 days late. Further, the plaintiff asked whether the defendant had obtained any extension of time from the Controller of Housing and claimed that if no extension had been given by the Controller she was entitled to liquidated damages at 8% per annum on the purchase price which according to her calculation amounted to $ 27,826.66, i.e. from July 2, 1975 to June 1, 1977.

The plaintiff further stated in that letter that the balance of$ 17,907.20 which was payable by her was far less than the amount to which she was entitled under the agreement as liquidated damages. Therefore she suggested that the defendant should hand over the keys and pay her $ 9,919.46, the difference between the two amounts.

The defendant replied on August 15, 1977 (exhibit AB28) asking the plaintiff to call at its office to discuss the matter.

In the meantime, on August 13, 1977 the plaintiffs solicitors had written to the defendant AB27, claiming that their client was entitled to set off against the balance of the purchase price the liquidated damages due to the plaintiff under the agreement and asking the defendant to hand over the key and pay the plaintiff $ 9,919.46.

Subsequently, the defendant instructed its solicitors who by a letter dated September 23, 1977 (AB34) stated inter alia as follows:--

"2. Our client instructs us that the payment of the balance of the

purchase price to our client and the delivery of the keys and

premises by our client, and your clients claim for damages for

alleged delay are two entirely separate issues. We are instructed

to give you notice, which we hereby do, that if your client

wishes to obtain delivery of the keys to the premises, she must

immediately pay all outstanding sums to our client. If she does

not do so, she will be held fully responsible for any delay in

the delivery of the keys to her.

3. With respect to the entirely separate issue of your clients

claim for damages for alleged delay in the completion of the

three-storey shophouse, our instructions are as follows.