THE written court judgement of the Federal Court’s landmark decision that the housing controller has no power to grant an extension of time (EOT) to developers to complete their property development projects, is now available to the public.
Chief Justice Tan Sri Tengku Maimun Tuan Mat, who led a five-member panel, held that Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 which confers power on the controller to waive and modify the terms and conditions of the contract of sale between purchasers and the developer was ultra vires the Housing Development (Control and Licensing) Act.
In this article, I will elaborate more on the Federal Court’s decision and the rationale.
The recklessness in invoking discretionary power
The issue of contention is in the Housing Development (Control & Licensing) Regulations, 1989 (HD Reg). HD Reg 11(3) was, time and again, invoked by the Controller of Housing against the detriment of the naïve and unwary house buying public and it reads:
HD Reg 11(3) – “Where the controller is satisfied that owing to special circumstances or hardship or necessity, compliance with any of the provisions in the contract of sale is impracticable or unnecessary, he may, by a certificate in writing, waive or modify such provisions: Provided that no such waiver or modification shall be approved if such application is made after the expiry of the time stipulated for the handing over of vacant possession under the contract of sale or after the validity of any extension of time, if any, granted by the controller.”
Hence, only the housing controller has the power to waive or modify the provisions of the sale and purchase agreement (SPA). So what is wrong with the controller giving an extension of time?
Is he not entitled to exercise his power under this HD Reg 11(3)? Has “granting of extension” been exercised in a just manner? Were the affected buyers accorded the “rights to be heard” since it affected them’?
No reasonable-minded person, let alone the Housing Minister and those under his charge, can possibly imagine that the powers given under HD Reg 11(3) are meant to be used against house buyers let alone blatantly and unilaterally take away rights which are expressly given to them by Parliament, rights which are expressly stated to be for their protection and created to serve and protect public interest.
If discretionary powers are not exercised with prudence, perhaps it is time for these powers to be removed or the minister replaced.
Proceedings in the Federal Court
After going through the legal process from the Judicial Review proceedings at the High Court and then to the Court of Appeal, the case finally reached its apex at the Federal Court. Leave to appeal (to the Federal Court) was granted on Oct 10, 2018 to both the purchasers and developer on several questions of law.
The legal team from the National House Buyers Association (HBA) represented the purchasers in the litigation proceedings on a pro bono basis. The purchasers’ questions to the Federal Court were:
(i) whether the housing controller has the power to waive or modify any provision in the Schedule H Contract of Sale as prescribed by the minister under the Housing Development (Control and Licensing) Act 1966 (HD Act) (Question 1);
(ii) whether Section 24 of the Housing Development (Control and Licensing) Act 1966 confers power on the minister to make regulations for the purpose to delegate the power to waive or modify the Schedule H Contract of Sale to the housing controller (Question 2);
(iii) whether HD Reg 11(3) of the Housing Development (Control and Licensing) Regulations 1989 is ultra vires the Housing Development (Control and Licensing) Act 1966 (Question 3).
The developer’s questions to the Federal Court were:
(iv) whether the letter granting an extension of time after an appeal pursuant to Regulation 12 of the Housing Development (Control and Licensing) Regulations 1989 must be signed personally by the minister and whether the minister could delegate his duties (signing of the letter granting the extension of time) to an officer in the Ministry of Urban Wellbeing, Housing and Local Government (Question 4);
(v) whether the minister, having taken into consideration the interest of the purchasers, is obliged to afford them a hearing prior to the minister granting the extension of time, albeit there is no such provision or requirement in the Housing Development (Control and Licensing) Act 1966 or Housing Development (Control and Licensing) Regulations 1989 (Question 5).
The purchasers’ submission and gist of arguments to the Federal Court were:
(1) under the Act, both the minister and the controller have separate and independent roles;
(2) as a general rule, the powers of the minister may not be delegated to the controller unless it is expressly provided under the Act;
(3) Section 24(2) of the Act expressly confers power to the minister to make regulation for the purpose of prescribing the statutory form for the contract of sale;
(4) the minister is also authorised to prescribe regulation for the purpose of regulating the terms and conditions of the contract of sale between the developer and purchasers;
(5) the word “regulate” is not defined in the Act;
(6) the word “regulate” ordinarily means “to control or to govern”,
(7) and it was not the intention of Parliament to authorise the minister to delegate the power to “prescribe” and to “control” and “govern” to the controller.
Landmark decision by the Federal Court
The Federal Court’s decision was delivered by Tengku Maimum. In the conclusion, the Federal Court Judges unanimously decide on the questions of the purchasers as follows:
Purchasers’ Questions 1 and 2 – Negative
Purchasers’ Question 3 – Affirmative
Developer’s Questions 4 and 5 – No necessity to answer
(Questions 1, 2 and 3 concern the validity of HD Regulation 11(3)). The following are excerpts of the pertinent rationale by the FC:
The Minister of Housing & Local Government having prescribed the Statutory Form H (SPA for stratified property) and the terms and conditions for the contract of sale (36 months completion date), the minister by regulation 11(3) of the Regulations then (purportedly) empowers the controller to waive or modify the conditions and terms of the contract of sale as prescribed in Schedule H.
This begs the question whether by empowering the controller to waive or modify the conditions and terms of the contract, the minister has exceeded the scope of the authority conferred on him by the legislature?
In other words, by empowering the controller, through regulation 11(3), has there been an act of sub-delegation by the minister to the controller which is ultra vires the Act?
Having in mind the principles enunciated in the several reported and cited cases on the issue of delegated legislation, the FC proceeded to ascertain the powers of the minister and the controller under the HD Regulations.
“By virtue of section 24(2)(e) of the HD Act, the minister is empowered or given the discretion by Parliament to regulate and prohibit the terms and conditions of the contract of sale.
As opined by the learned authors in De Smith’s Judicial Review, a discretion conferred by statute is prima facie, intended to be exercised by the authority on which the statute has conferred it and by no other authority, but the presumption may be rebutted by any contrary indication found in the language, scope or object of the Act. In our view, having regard to the object and purpose of the Act, the words “to regulate and to prohibit” in subsection 24(2)(e) should be given a strict construction, in the sense that the minister is expected to apply his own mind to the matter and not to delegate that responsibility to the controller”.
“The HD Act being a social legislation designed to protect house buyers, the interests of the purchasers shall be the paramount consideration against the developer. Parliament has entrusted the minister to safeguard the interests of the purchasers and the minister has prescribed the terms and conditions of the contract of sale as per Schedule H. We find no contrary indication in the language, scope or object of the Act that such duty to safeguard the interests of the purchasers may be delegated to some other authority.”
“It is the minister who is entrusted or empowered by Parliament to regulate the terms and conditions of the contract of sale. The minister, however, has delegated the power to regulate to the controller by regulation 11(3) of the Regulations. As power to regulate does not include power to delegate, the minister’s action in delegating the power to modify the conditions and terms of the contract of sale may be construed as having exceeded what was intended by Parliament.”
‘Schedule H contract of sale prescribed by the Regulations is to carry into effect provisions of the Act, which is to protect the interests of the purchasers. The regulations made by the Minister must thus achieve the object of protecting the interests of the purchasers and not the interests of the developers. And at the risk of repetition, the duty to protect the interests of the purchasers is entrusted to the Minister’. By delegating the power, vide regulation 11(3) to the Controller to waive or modify the prescribed terms and conditions of the sale of contract, it is now the Controller who has been entrusted to regulate the terms and conditions of the contract of sale. Further, by modifying the prescribed terms and conditions and by granting the developer the extension of time, the Controller has denied the purchasers’ right to claim for liquidated ascertained damages/ compensation ( LAD). This modification and the granting of extension of time to the developer, does not appear to us to protect or safeguard the purchasers but rather the developer and this militates the intention of Parliament’.
‘It was submitted for the developer that the purchasers would suffer greater hardship if the project is not completed as compared to not being able to claim for LAD. With respect, we fail to see the merit of this submission. If the developer fails to obtain an extension of time to deliver vacant possession, that in itself does not mean that the developer has failed to complete and hence, have abandoned the project.
“Whether or not the developer is granted an extension of time does not necessarily determine the fate of the project. The extension of time only determines payment of LAD. In this regard, we must not lose sight of the purchasers’ obligations to pay for progress instalment to their respective housing financier and/or payment of rental to their landlord. It is a matter of balancing the commercial interest of a multi-million housing development company against the life-time loan commitment of a purchaser for a basic living necessity.
“As can be seen from the long line of authorities, it is the interests of the purchasers that prevail over that of the developer. We therefore hold that in allowing the controller to waive or modify the terms and conditions of the contract of sale and in the process, denying the purchasers’ right to claim for LAD as prescribed by the minister under Schedule H, regulation 11(3) does not comply with the description of the Regulations which is designed to protect the interests of the purchasers.
“The powers and duties of the minister, the controller and an inspector, respectively had thus been clearly defined (in the HD Act). It is also pertinent to highlight, that by section 4(2), express provisions were made for the exercise of an inspector’s powers by the controller.
“By subsections (3) and (4) of section 4, Parliament had expressly allowed for the delegation of the controller’s powers to named persons. But there is no such provision enabling the controller to exercise the minister’s powers. This supports our view that Parliament did not intend for the minister’s powers to regulate the terms and conditions of a contract of sale to be delegated to the controller.
“On the above analysis, we hold that the controller has no power to waive or modify any provision in the Schedule H contract of sale because section 24 of the Act does not confer power on the minister to make regulations for the purpose of delegating the power to waive or modify the Schedule H contract of sale to the controller. And it is not open to us to read into the section an implied power enabling the minister to do so. We consequently hold that regulation 11(3) of the Regulations, conferring power on the controller to waive and modify the terms and conditions of the contract of sale is ultra vires the Act.”
A four-corner fight
HBA’s legal team had to contend with the developer’s lawyers as well as those lawyers holding watching briefs (yet allowed to address the court) for the Real Estate and Housing Developers’ Association (Rehda) and the Bar Council (both Rehda and the Bar Council supported the position taken by the developer as observed by FC learned Judges).
A whopping 536 EOT approvals invoked
There have been a total of 536 Extension of Time (EOT) approvals granted by the Controller of Housing under HD Reg 11(3) and HD Reg 12 by the housing minister since year 2014, according to the recent Parliament Hanzard that was made available in the current sitting.
The figure is mind-boggling. How could they have issued the EOTs to developers to save them to the detriment of house buyers?
Threshold: 30-storey and above to enjoy automatic 48 months’ completion date?
It is time to amend the laws again to cater for a longer construction/ completion period for housing developers that embark on multi-level developments and depending on the complexity of certain projects.
Perhaps, the threshold for 30-storey and above high-rises should be automatically granted 48 months’ completion date? But, don’t give the discretionary power to the housing minister and those under his charge: it may be abused. – Feb 6, 2020
Datuk Chang Kim Loong is secretary-general of the National House Buyers Association (HBA)