Change In Materials Specified In The SPA Without Consent - What Rights Does A Purchaser Have?

• Published date: 18 November 2022
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Real Estate
• Law Firm: Bodipalar Ponnudurai De Silva
• Author: Info Bpdlex

When a buyer assumes possession of a property and learns that the materials or the facilities provided were not as promised or agreed upon in the Sale and Purchase Agreement, it may be frustrating. The Federal Court in an unanimous decision in Chong Nge Wei & Ors v Kemajuan Masteron Sdn Bhd [2022] 4 CLJ 833 recently overturned the decision of the Court of Appeal and reinstated the High Court's ruling regarding the interpretation of Clause 12 (now re-numbered as Clause 14) of the statutory Sale and Purchase Agreement ('Clause 12') under Schedule H of the Housing Development (Control and Licensing) Regulations 1989 ('HDA') which, inter alia, entitles the purchaser of a housing unit the right to request a corresponding reduction in the purchase price or claim damages against a Developer who uses different materials in constructing the property than that stated in the agreement without the purchaser's written consent.

A case was brought by purchasers of 6 apartment units against Kemajuan Masteron Sdn Bhd ('the Developer') for amongst others, liquidated ascertained damages ('LAD') for failure to deliver vacant possession and common facilities within the time stipulated in the Sale and Purchase Agreements ('SPA') and breach of contract under Clause 12 of the SPA for a change in building materials without the purchasers' consent.

The High Court had allowed the purchasers' claim and ordered an assessment of damages pursuant to the Developer's breach of Clause 12 which led to an award by the Senior Assistant Registrar in the sum of RM380,500.00. After an unsuccessful appeal to the judge in chambers, the Developer then succeeded in an appeal to the Court of Appeal whereby the Court of Appeal found that as the purchasers' chose not to claim for a reduction of the purchase price of their units and instead claimed for damages, the change in building material did not adversely affect the units nor reduce the value of the same; that the purchasers were attempting to make a double recovery and gain substantial profits from the Developer's breach; and the purchasers had failed to adduce any evidence of their losses arising from a breach of Clause 12.

The primary question that arose in the Federal Court on appeal by the purchasers was whether a claim for damages, for the purpose provided for in Clause 12 of the SPA, under Schedule H of the HDA, requires proof of actual loss to be shown before damages could be awarded.

The Federal Court held that, pursuant to Clause 12, if...