Law passed to extend vacant possession is constitutional, rules court

 Courts are obliged to adopt a purposive construction that promotes the object or purpose of the written law.

The Court of Appeal has dismissed an appeal brought by six house buyers to strike down a minister’s order granting a developer a backdated 214-day extension of time for delivery of vacant possession.

PUTRAJAYA:

The Court of Appeal has unanimously upheld the retrospective application of a law granting housing developers additional time to deliver vacant possession of homes during the Covid-19 pandemic, ruling that Parliament’s intent must be given effect.

Justice Ahmad Fairuz Zainol Abidin said statutes must be read holistically, especially when its purpose is clear.

“No single subsection can be construed in isolation to defeat the very purpose of another subsection within the same provision,” he said.

The judge was delivering the court’s decision dismissing an appeal brought by six house buyers to strike down a minister’s order granting developer Sime Darby Brunsfield Resort Sdn Bhd a backdated 214-day extension of time.

In Oct 2020, Parliament passed the Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020 (Act 829), granting developers an extension of time for the delivery of vacant possession covering the period March 18 to Dec 31, 2020.

Due to the far-reaching effects of the pandemic, an amendment was passed on Jan 13, 2022 extending the exemption period to cover the entirety of 2021.

However, the amended Section 38C(3) stipulated that the minister “shall not consider” an application if it is made “after the expiry of the time for delivery of vacant possession”.

The house buyers’ primary complaint rested on the interpretation of Section 38C(3), as amended, which, they argued, statutorily prohibited the housing and local government minister from entertaining the developer’s application for an extension of time.

However, the Court of Appeal ruled on Friday that the statute must be given a purposive construction that promotes the purpose of the law.

Fairuz said Section 38C(1) of the amended law entitled the developer to apply to the minister for any period falling between Jan 1 and Dec 31, 2021.

“However, (the amendment) was only gazetted on Jan 13, 2022 and came into force the following day. By that date, the entire year 2021 had already passed,” he said.

Fairuz said Section 38C(3), when read in isolation, bars any application being made after the contractual vacant possession date has passed, meaning no developer could ever successfully apply for exemption in respect of a project that fell during 2021.

“This is because, since Act A1641 came into force only in January 2022, every affected developer would, theoretically, be applying after the vacant possession date,” he said.

The judge said the courts are obliged to interpret a statute in a manner that gives it practical effect.

“A construction that destroys the very right Parliament chose to create cannot be the correct one. Parliament does not legislate in vain,” he said.

Fairuz said the developer had sufficiently proved that the delays in construction were due to the pandemic.

He also noted that the house buyers had not challenged the two previous exemptions obtained by the developer under Act 829.

Section 38C not unconstitutional

Fairuz also dismissed the house buyers’ contention that Section 38C was unconstitutional and violates Article 13 of the Federal Constitution.

Article 13 provides that no person shall be deprived of their property, save in accordance with law.

“It is our view that Section 38C is not arbitrary, vague or unjust. It is a carefully drafted legislative response to a defined and documented public health emergency,” he said.

He noted that Parliament had clear empirical justification for the measure as the construction industry had suffered RM42 billion in losses due to movement control orders issued in 2020 and 2021.

Fairuz said Section 38C was also proportionate as its objective was to prevent the collapse of the housing construction industry during an unprecedented global pandemic. He said the amendments also offered protection to purchasers.

A temporary relief introduced during a pandemic did not give rise to the infringement of a permanent constitutional right guaranteed under the Federal Constitution, the judge added.

The court also dismissed the house buyers’ contention that Section 38C violates Article 13(2) of the constitution as it was tantamount to a compulsory acquisition or use of their liquidated ascertained damages (LAD) rights without adequate compensation.

“This argument fails as Section 38C does not transfer any property from the appellants to anyone else. Those rights are suspended for a defined period.

“There is no transfer of ownership, possession or control nor extinguishment of the purchaser’s right to LAD under the respective SPA,” he said.

Fairuz said LAD is purely a contractual remedy provided for in sale and purchase agreements. Its breach cannot translate to a violation of Article 13, he added.

The bench — also comprising Justices Ravinthran Paramaguru (now a Federal Court judge) and Azizul Azmi Adnan — heard 10 other appeals contested between developers and house buyers over delay in delivery of vacant possession attributable to the pandemic.

The bench allowed the developers’ appeals and dismissed the appeals brought by house buyers seeking LAD.

Lawyer James Ee, who appeared for developer Platinum Eminent Sdn Bhd, said the ruling had brought certainty in the housing industry.

“There was a lot of confusion due to conflicting decisions in the High Court,” he told FMT.

Lawyers Pretam Singh and Kalvinder Singh Bath, who appeared for Sime Darby, said the ruling prevents buyers from walking away with a “windfall” and ensures some degree of protection for developers, especially during exceptional times. - FMT