A late Covid-19 Act will make it redundant

By Chang Kim Loong

THE Republic of Singapore’s Parliament has recently passed a legislation titled the Covid-19 (Temporary Measures) Act 2020 and was immediately assented to by the president. The Act was gazetted on April 9.

However, Malaysia had to play politics to defer the tabling of the bill to the second parliamentary sitting between July 13 and Aug 27.

If there is going to be any Covid-19 Act in Malaysia, before such legislation can become law, there is going to be the tabling of the Covid-19 Bill which will be tabled at the Dewan Rakyat for first reading.

It is at the second reading that the Covid-19 Bill will be put through the process of debate and subsequently at the third reading, if there are no objections, the Covid-19 Bill will be passed to the Dewan Negara for their endorsement. Our King will then finally assent to the proposed legislation.

As such, this entire legislative process will take months, and if a Covid-19 Act is to be passed to grant temporary relief to those needing such relief, such Act will probably become law in September at the earliest. This is a rather optimistic projection which does not take into account further political interference.

Effluxion of time

The damage afflicted by Covid-19 is evident to all; closure of businesses, shutdown of government offices, loss of jobs, pay cuts, limited movements, rise in domestic violence, spousal abuse, child abuse and deaths.

While a Covid-19 Bill cannot cure the country of the Covid-19 virus, it is within the power of the government to expedite the passing of a Covid-19 law so as to intervene and shield parties to contracts who are victims of Covid-19 and the Movement Control Order (MCO).

Even our health director-general had stressed that early medical treatment is key to preventing deaths for those who have contracted the virus. Death renders medical treatment redundant for patients who seek treatment too late. It is the same for tabling a late Covid-19 Bill and the passing of a tardy Covid-19 Act.

It is impossible to turn back time and undo the carnage of Covid-19 by passing a Covid-19 Bill any later than now! The effect of such a late Covid-19 Bill which is retrospective in nature will be simply too late and redundant.

In most if not all contracts, there is always a stipulation that a party to a contract must perform their obligation within a certain time. In legal terms, time is of the essence of a contract and the failure to follow stipulated timelines will be considered an event of default giving rise to enforcement of rights or remedies by the other contracting party.

The proposed Covid-19 Bill was intended to provide a legal shield to parties who are unable to meet their obligation.

A late Covid-19 Bill cannot salvage events which have already been set in motion from the start of the MCO because the affected parties would have “moved on” because of the effluxion of time.

In other words, a late Covid-19 Act is redundant in nature. You cannot legislate back to life a business that has already closed down due to the failure of the business owner to sustain their business and pay rent during the MCO.

Under our proposed Covid-19 Act, safeguards to the covenanting parties can range from duration of relief, prohibition from penalisation (termination, determination, forfeiture, levy of penalties, etc) due to breach of obligations under a contract or failure to perform and/or entitlement.

It ceases to matter who has the upper hand or is put to a disadvantage in any contract that has gone awry due to the MCO, whether it is present or post-MCO. All victories are pyrrhic in nature – the victory will be at the expense of great losses to the victor.

An example would be where the landlord forfeits a tenant’s security deposit owing to the tenant’s default in paying rental.

In such a situation, the landlord is also not in the position of victory because the landlord may have to expend further cost and expense to obtain vacant possession of the premises, dispose of the tenant’s equipment and fittings (if the tenant abandons the premises) and also scour the market for a suitable new tenant at the same rental rate.

All of these represent continuous financial loss to the landlord who has also mortgaged the premises to a financial institution and needs to service their loan. Any relief that could have been given by the late Covid-19 Act would probably be water under the bridge because those aggrieved contracting parties would have initiated legal proceedings earlier on at our courts of law to resolve their differences or seek judicial intervention or relief.

Our courts will be inundated with unnecessary litigation which could have been prevented by the quick action of our lawmakers – but alas, it is not to be because of our lackadaisical attitude. The efforts, by all the trade organisations, NGOs and vested parties would be deemed irrelevant and in vain.

A tardy Covid-19 Act would also create confusion and uncertainty to contracts which have been determined or terminated prior to the Covid-19 Act. Is such termination considered valid and are the remedies or forfeitures which have taken place binding on the parties? 

Legal ramification and domino effect

The MCO will trigger a chain reaction akin to a domino effect across the entire supply chain with the purchasers claiming liquidated ascertained damages (LAD) from the developers, which in turn would attempt to recover their losses from the contractors, who would then abandon the project when they could not pay.

The developers would then be unable to pay the consultants, suppliers, creditors and even the bank loans and facilities, which will in turn create another chain of litigations.

The successful bidder of a public auction, who has paid the initial deposit, now risks his Contract to Purchase being summarily terminated for default in paying the balance bidded price because there was no force majeure clause in the proclamation of sale. The bank would not risk unilaterally offering the bidder an extension at the expense of their delinquent customer.

Soon, the entire industry would be mired in a vicious cycle of litigations. A spike in the number of problematic projects, winding up of development companies, purchasers made bankrupt due to failure to service housing loans and eventually even the banks will experience the credit crunch. In the end, all parties lose out. Bear in mind, there are also commercial construction projects at stake.

People or politics first?

To me, the “new normal” also refers to a new mindset for every single political party, be it the ruling government or opposition where the motto should be “PEOPLE FIRST, politics second”.

Cast aside whatever personal interest, political aspirations and agendas to unite and legislate at top speed a Covid-19 Act to offer protection now so that many will have the opportunity to survive.

It is paramount that we restore confidence in our own citizens to continue investing in their own country through continuous economic activity and to restore our investors’ confidence that Malaysia remains as an attractive destination for investment.

To recover from Covid-19, everyone from the employees to business owners to governments must be prepared to make sacrifices in order to have any hope of recovering from the devastation caused by the virus.

Datuk Chang Kim Loong is the honorary secretary-general of the National House Buyers Association (HBA)

Share on facebook
Share on twitter
Share on whatsapp
Share on email

Subscribe and get top news delivered to your Inbox everyday for FREE