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2008 MarsdenLR 3260
COURT OF APPEAL (PUTRAJAYA)
GOPAL SRI RAM, J, HELILIAH BT MOHD YUSOF, J, AHMAD BIN HAJI MAAROP, JJCA
Sentul Raya Sdn Bhd – Plaintiff
Versus
Hariram al Jayaram and Others – Defendant
RAYUAN SIVIL NO W-02-704-2002
Tharminder Singh (Loan Sabapathy & Co.) for the appellants
Sree Harry (Sree Harry & Co.) for the respondent
The court affirmed that failure to meet contractual deadlines without notice results in immediate liability for liquidated damages, and invoking the doctrine of frustration requires more than increased difficulty in performance.
Headnote:(A) Housing Development (Control and Licensing) Act 1966 - Contracts Act 1950 - Section 56(3). - Appeal concerning the enforceability of contractual obligations related to vacant possession and completion of housing facilities delayed by financial crisis. - Court ruled that upon failure to meet timelines, 'time ceases to be of the essence and becomes at large', and liquidated damages are immediately applicable. - Dismissed appeals; allowed cross appeals for liquidated damages owed to respondents. (Paras 1, 6, 15, 21)
(B) Frustration of contract - Court established that merely making a contract more onerous does not amount to frustration; no entitlement to relief under the doctrine available. (Paras 12, 17).
(C) Burden of proof for damages in contractual claims - Damages fixed by contract eliminate additional evidentiary burden on respondents. (Para 18).
Findings of Court:
The court found that the appellant's arguments regarding time and frustration lacked merit and upheld the structured liability for liquidated damages as per the contract.
Issues: The main issues included the enforceability of contract clauses concerning completion timelines and basis for assessing damages.
Ratio Decidendi: The court clarified that on breach concerning timelines, if not previously enforced, parties must provide notice to restore time to essence; the doctrine of frustration does not apply where conditions for performance exist.
Result: All appeals dismissed; cross appeals allowed.
GOPAL SRI RAM,JCA
ORAL JUDGMENT
This is the Judgment of the Court.
There are 10 appeals before us today. They all give rise to common issues. In four of them there are cross appeals. We have heard a single argument from either side in all the appeals as well as the cross appeals. The relevant facts are as follows.
The appellant is a housing developer. Its activities are controlled and regulated by the Housing Development (Control and Licensing) Act 1966
Before us, learned counsel for the appellant raised four grounds in support of the appeals. We will deal with each of them in turn. The first point is based on section 56(3) Contracts Act 1950
(1)When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.
Effect of failure when time is not essential
(2)If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do the thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by the failure.
Effect of acceptance of performance at time other than that agreed upon
(3)If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of the promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of the acceptance, he gives notice to the promisor of his intention to do so”
In order to appreciate learned counsel's submissions on the application of section 56(3) it is necessary for us to deal with the relevant clauses in the statutory contract prescribed by the Regulation 11(1) of the Housing Development (Control and Licensing) Regulations 1989
“Clause 22(2)
If the Vendor fails to hand over vacant possession of the said Parcel, to which water and electricity supply are ready for connection to the said Parcel, in time, the Vendor shall pay immediately to the Purchaser liquidated damages to be calculated from day to day at the rate of ten percentum (10%) per annum of the purchase price.
Clause 24
(1)The common facilities serving the said housing development shall be completed by the Vendor within thirty six (36) calendar months from the date of this Agreement.
(2)If the Vendor fails to complete the common facilities in time the Vendor shall pay immediately to the Purchaser liquidated damages to be calculated from day to day at the rate of ten percentum (10%) per annum of the last twenty per centum (20%) of the purchase price.”
It is the appellant's case that time was at large once the date for it to deliver vacant possession had passed. If any of the respondents wish to make time of the essence once more it is incumbent upon each of them to give notice in that behalf under section 56(3)Contracts Act 1950 Sim Chio Huat v Wong Ted Fui
“The position is this: If in a contract in which time is of the essence, a party fails to perform it by the stipulated time, the innocent party has the right either to rescind the contract, or to treat it as still subsisting. If he treats it either expressly or by conduct as still continuing, the contract exists but time ceases to be of the essence and becomes at large. Consequently he cannot claim the liquidated damages under the contract unless there is a provision as to the extension of time. However, this cessation can be revived and so time can be restored to be of the essence by the innocent party serving a notice to the party in default giving a new date of completion. If this is done there would be a date from which
