Can the courts grant an extension of time for completion of a contract which performance has been delayed or hindered due to the movement control order?

HO KEAN PIN v. MALAYAN BANKING BERHAD & ANOR [2020] 1 LNS 1107

• Ho Kean Pin (“Ho”) is the successful bidder at a public auction carried out by the High Court of Penang on 7 January 2020 of a property (“Property”) at an auction price of RM365,000-00 and paid 10% of the reserve price amounting to RM35,000-00 (“Deposit”).

• Subsequently, Ho secured a term loan facility for RM328,500-00 together with MRTA for RM3,078-00 from Malayan Banking Berhad (“Bank”) on 21 January 2020 for the purchase of the Property.

• Ho was required to pay the balance purchase price before the expiry date of 6 May 2020 as stipulated in the Conditions for Sale of the auction.

• Unfortunately, The Government of Malaysia pursuant to section 11 of the Prevention and Control of Infectious Diseases Act 1988 (Act 342) imposed a movement control order (“MCO”) for 56 days, to curb the transmission of Covid-19 virus as a safety measure for the people of Malaysia.

• During the MCO, the Penang land office, law firms and other relevant bodies were not allowed to operate except banking and financial institutions.

• As the last date to pay the balance purchase price on 6 May 2020 was during the MCO period, the sale could not be completed and Ho filed this application seeking an extension of time to complete the transaction.

• Ho contended that the MCO enforced by the government was beyond the control and outside the reasonable contemplation of the parties which made the performance of Ho’s obligation impossible.

• Thus, it was unfair and prejudicial for Ho to be held responsible for the non-performance of the said obligations which is due solely to the imposition of the MCO and not caused by any fault of Ho.

• The lodgement of a private caveat on the Property by the Bank was a prerequisite condition before the release of the loan/balance purchase price by the Bank and the private caveat could not be lodged because the Penang land office was not operational during the entire duration of the MCO.

• Also, Ho averred that it would suffer injustice if the Deposit was forfeited if the balance purchase price is not paid within the stipulated time period as provided in the Conditions of Sale of the auction and in section 357(1)(g) of the National Land Code 1965 (“NLC”).

• The Bank on the other hand, relied on section 357(1)(g) of the NLC which stated that there shall be no extension of time for the period specified for the payment of the balance purchase price. However, the Bank left it to the discretion of the court whether or not to grant the extension of time sought by Ho.

The High Court dismissed the application on the following basis:

• It is indeed unfortunate that Ho is placed in this dire predicament due to no fault on his part but for the imposition of the MCO.

• However, unlike some other countries where new laws were passed to deal with issues of this nature, at the time of writing this judgment, in Malaysia new legislative provisions have yet to be enacted by Parliament to deal with a situation as in this application which is caused solely by the restrictions of the MCO.

• Thus, without the necessary legislative provisions, this court cannot grant any orders that would be in breach of the clear mandatory provisions of section 257(1)(g) of the NLC.

• Whilst the courts can consider invoking its inherent jurisdiction to allow the application if the present circumstances were a fit and proper case and in the interest of justice, the courts have to at the same time ensure that the Bank’s interests were not jeopardised when deciding whether to grant this application.