Lord Oliver of Aylmerton

(delivering the Judgment of the Board): In 1966 there was introduced in West Malaysia a scheme for the protection of purchasers of new houses and for the control and licensing of housing developers. Its provisions are contained in the Housing Developers (Control and Licensing) Act 1966 (Act 118). The Act laid down stringent provisions for licensing developers and in section 24 conferred upon the Minister of Local Government and Housing power to make regulations which might (inter alia) "regulate and prohibit the conditions and terms of any contract between a licensed housing developer, his agent or nominee and his purchaser." That power was exercised by the Housing Developers (Control and Licensing) Rules 1970 which came into force on July 15, 1970. Rule 12(1) provided:

"Every contract of sale shall be in writing and shall contain within its terms and conditions provisions to the following effect, namely …"

There followed a list of twenty-one matters which were required to be contained in the contract, the relevant ones for present purposes being the following:

"(o) Provisions specifying the date of delivery of the vacant possession of the housing accommodation to the purchaser which date shall be not later than 18 months after the date of signing of the contract of sale; …

(r) Provisions binding on the licensed housing developer that he shall indemnify the purchaser for any delay in the delivery of the vacant possession of the housing accommodation. The amount of indemnity shall be calculated from day to day at the rate of not less than eight per centum per annum of the purchase price commencing immediately after the date of delivery of vacant possession as specified in the contract of sale:"

Rule 12(2) conferred on the Controller (an office established by the Act) power to waive or modify the provisions of role 12(1) in respect of any contract of sale if he was satisfied that special circumstances rendered compliance with that Rule impracticable or unnecessary.

The respondent is a corporate licensed housing developer which, on March 18, 1974, entered into a contract with the appellant for the purchase of a shophouse to be erected on a housing estate at a price of 175,000 Malaysian Ringgit, payable by stage payments as the building proceeded in accordance with clause 3 of the contract. Clause 17 of the contract was in the following terms:

"Subject to clause 32 hereof and/or to any extension or extensions of time as may be allowed by the Controller the said building shall be completed and ready for delivery of possession to the purchaser within eighteen (18) calendar months from the date of this Agreement. Provided always that if the said building is not completed and ready for delivery of possession to the purchaser within the aforesaid period then the vendor shall pay to the purchaser agreed liquidated damages calculated from day to day at the rate of eight per centum (8%) per annum on the purchase price of the said property from such aforesaid date to the date of actual completion and delivery of possession of the said building to the purchaser."

Clause 32, which has an historical significance in the events leading up to this appeal, was a clause which purported to exonerate the respondent from liability for failure to perform the contract for causes outside the respondent's control including inter alia disability of contractors or subcontractors employed by the respondent.

In fact the building was not completed on the due date, i.e. September 18, 1975. Possession was not finally delivered until November 7, 1977, On April 21, 1980, the appellant by a letter from the solicitors demanded payment of the sum of $29,972.01, a sum equal to interest at 8% per annum on the full price of $175,000 calculated for a period of twenty five months and twenty one days. The respondent's solicitors replied on April 26, 1980, repudiating liability for the sum claimed and basing themselves on clause 32 of the contract,