Case Update: The Validity of an Extension of Time for the Delivery of Vacant Possession by a Minister

Introduction

          On 24^th January 2022, the Court of Appeal in Bluedream City Development Sdn Bhd v Kong Thye & 184 Others and 5 other appeals (“Bluedream”) took a definitive view on the powers of a Minister of the Housing and Local Government (the “Minister”) under the Housing Development (Control and Licensing) Act 1966 (the “HDA”). The decision departed from the Federal Court’s decision in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar [2020] 1 MLJ 281 (“Ang Ming Lee”).

          In essence, the Court of Appeal held that the Minister is not permitted to delegate his powers, vested to him under the HDA, to the Controller to grant an extension of time to a developer in the completion of a development.

Case Facts

          In Bluedream, the Developer applied to the Controller under Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 (the “HDR”) for an extension of time of 17 months (from 42 months to 59 months), precisely the same amount of time in which a stop work order was implemented on the development as a result of the existence of subsidence and cracks at a nearby school. The Controller only granted an extension of 12 months, i.e. from 42 months to 54 months. The Developer appealed to the Minister against the decision of the Controller pursuant to Regulation 12 of the HDR. To this end, the Minister allowed the appeal and granted the extension to complete the works within 59 months. Aggrieved by this decision, the purchasers of the development challenged the same by way of judicial review at the High Court.

High Court’s Decision

The High Court allowed the purchasers’ applications against the Minister’s decision owing to the binding effect of Ang Ming Lee and accordingly ordered the Developer to pay liquidated ascertained damages (“LAD”) as claimed from the period of 36 months.

Court of Appeal’s Decision

          It is pertinent to note that the key fact distinguishing Bluedream from Ang Ming Lee is that the extension of time in the latter was granted by the Controller on behalf of the Minister, whereas the extension of time in Bluedream was granted by the Minister personally.

          The Court of Appeal allowed the appeal and denied the purchasers’ claims. Its position was simply that Ang Ming Lee expounded the fact that the Controller could not grant an extension of time to a developer because the Minister is not permitted to delegate that power to the Controller, as this was not provided for under Section 24 of the HDA. Sections 4(3) and 4(4) of the HDA allowed for the delegation of the Controller’s power to specified persons but this did not extend to the Controller having the authority to exercise the Minister’s powers. In view of the above, Regulation 11(3) of the HDR, which allows the Controller to waive or modify the provisions of the statutory sale and purchase agreements (“SPA”), was ultra vires the HDA. However, this does not prohibit the Minister from ‘varying and modifying’ the terms of the statutory SPA through the powers vested in him under the HDA.

          The Court of Appeal in Bluedream was further tasked with determining if there was a breach of natural justice when the purchasers were not afforded the right to be heard – on the Minister’s decision to grant the extension of time. The court took the view that there was no express requirement under the HDA for the purchasers to be heard, as long as the Minister had acted fairly and justly. Further, the right to be heard would yield little to no difference as the procedure was administrative, rather than judicial in nature. This was a case in which the developer was sincerely saddled by the subsidence and cracks that occurred at the nearby school resulting in the issuance of the stop work order, and the period of extension requested by the developer corresponded to that.

          In justifying the reasonableness of the decision, the Court of Appeal opined that “a balancing act may be done to extend the time of completion, taking into consideration the delay caused, which was beyond the developer’s control and the extent of completion of the project as a whole and the interest of the purchasers who would be saying that they do not care what is the cause of delay but that they must be compensated under the agreed formula provided in the statutory SPA.”

          To this end, the decision of the Court of Appeal seeks to clarify the position enunciated in Ang Ming Lee, but in the same breath, needs to be read in isolation as the factual matrix of the case may differ from other cases. Regulation 11(3) of the HDR is only invalid to the extent that it provides the Controller with the power to waive or modify the SPA – this power lies only with the Minister.

Takeaways

1. The Minister may exercise his powers and grant an extension of time, but may not delegate this power to the Controller.
2. In considering an extension of time granted by the Minister, the courts would have to balance whether the Minister had arrived at a decision by taking into account irrelevant considerations and the financial hardship of the developer in having to meet the LAD claims.
2. There is no change in law. Bluedream has only clarified the position in Ang Ming Lee based on the set of facts before the Court of Appeal.