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2022 MarsdenLR 588
COURT OF APPEAL PUTRAJAYA
ICON CITY DEVELOPMENT SDN BHD – Appellant
Versus
K-SHIN CORPORATION SDN BHD – Respondent
[Civil Appeal No: W-02(NCVC)(W)-1596-08/2018]
A developer is liable for liquidated damages for failing to timely deliver vacant possession, regardless of alleged extensions that do not comply with contract requirements.
Headnote:(A) Sale and Purchase Agreement – Liquidated damages – Delivery of vacant possession – The appellant failed to deliver vacant possession of the shop office by the stipulated date, leading to a claim for liquidated damages of RM1,052,739.73. The court found that two letters of extension of time issued by the second defendant were invalid as they did not comply with the terms of the sale and purchase agreement – The appellant provided vacant possession, which was deemed to have occurred on 30 December 2015 – Claims for liquidated damages were valid from the period of delay until valid possession was delivered. (Paras 18, 21-22, 30-31, 56-58)
Facts of the case: The respondent purchased a shop office from the appellant under an agreement that allowed for liquidated damages in the event of delayed delivery. The contract specified conditions for the delivery of vacant possession, including the completion of utilities and certification by the architect.
Findings of Court: The high court's decision regarding the validity of architect's letters was overturned; the issuance of the Certificate of Completion and Compliance was separate from the delivery of possession.
Issues: Whether the letters from the architect constituted valid extensions of time and whether the respondent's suit for liquidated damages was premature.
Ratio Decidendi: The court emphasized the necessity of observing contractual obligations pertaining to delivery of possession and the clear definitions within the agreement concerning the obligations to complete necessary works before delivering possession.
Result: The appellate court allowed the appeal, reducing the awarded liquidated damages to RM834,246.00, with interest
JUDGMENT
Introduction
[1] The appellant was the 1st defendant in the High Court ("appellant") whilst the respondent was the plaintiff in the High Court ("respondent"). The respondent's case against SN Low & Associates Sdn Bhd., which is a body of professional Architects and which is the 2nd defendant in the High Court had been struck out.
[2] The appellant appealed against the decision of the High Court in allowing the claim of the respondent against the appellant pursuant to the Sale and Purchase Agreement dated 30 June 2011 ("SPA") for the liquidated ascertained damages ("LAD") for the delay in delivery of the vacant possession of a unit of eight-storey shop offices identified as Parcel No A-16, Block No A ("Shop Office") in the Icon City Project ("Project") as well as for the refund of service charges and insurance which were paid prematurely.
Background
[3] The pertinent facts of this case have been summarized by the learned High Court Judge ("learned High Court Judge") in her Grounds of Judgment and we will adopt the same herein for ease of reference. They are as follows:
"(1) On 30 June 2011, the plaintiff entered into a contract with the 1st defendant vide a sale and purchase agreement to purchase the shop office from the 1st defendant;
(2) The date of completion and delivery of vacant possession of the shop office by the 1st defendant to the plaintiff as stipulated in the contract is on or before the expiry of 36 months from the date of the Period of Approval or the Extended Period of Approval ("the 36 months' period');
(3) The contract defines the Period of Approval as 12 months from the date of the contract to obtain the Development Order, the Conversion Approval and the Approval of the Building Plans from the Relevant Authorities;
(4) The contract stipulated that the 1st defendant shall pay LAD to the plaintiff at the rate of 10% of the purchase price to be calculated from day to day in the event that the 1st defendant shall fail to complete and deliver vacant possession of the shop office to the plaintiff within the Specified Period or the extended time allowed by the 2nd defendant;
(5) Subsequently, the 1st defendant confirmed in a letter dated 8 April 2016 that the Development Order, the Conversion Approval and the Approval of the Building Plans from the Relevant Authorities were obtained on 5 June 2012;
(6) Hence, pursuant to the contract between the 1st defendant and the plaintiff, the 36 months' period for the completion and delivery of the shop office will expire on 4 June 2012 (should be "4 June 2015");
(7) However, the contract allows the 2nd defendant being the Architect to make a fair and reasonable extension of time of the 36 months' period for completion and delivery of vacant possession of the shop office;
(8) If in the opinion of the 2nd defendant, the completion and delivery of vacant possession of the shop office is delayed by reason of exceptionally inclement weather, civil commotion, strikes, lockout, war, fire, flood or for any such cause beyond the 1st defendant's control;
(9) Subsequently, the 2nd defendant issued 2 letters of extensions of time dated 14 August 2015 and 21 December 2015, respectively, purportedly to extend the 36 months' period for completion and delivery of vacant possession of the shop office, initially from 4 June 2015 to December 2015 and subsequently, from December 2015 to 15 January 2016 on the ground that there were disputes or issues arising from the contract between the 1st defendant and its contractor ("the 1st defendant's contractor");
(10) As a result of the 2nd defendant's 2 letters of extensions of time, the 1st defendant refused to pay LAD to the plaintiff for the late completion and delivery of vacant possession of the shop house to the plaintiff;
(11) The plaintiff disputed the validity of the 2nd defendant's 2 letters of extensions of time on the ground that disputes or issues arising from the construction contract between the 1st defendant and the 1st def
