“When should the developer deliver vacant possession of a commercial property?”
CASE:
BRIEF FACTS:
- 62 purchasers bought Small Office Versatile Office (“SOVO”) units [“the Purchasers”] from the Developer, Icon City Development Sdn Bhd (“Icon City”) under separate Sale and Purchase Agreements (“SPA”).
- Under Clause 35 of the SPA, it required both the conversion approval for the land and the building plan approval to be obtained within 12 months from the date of the SPA (“Approval Period”), with a further extension of six months permitted (“Extended Approval Period”). Thus, a maximum total period of 18 months from the date of the SPA.
- Section 10 of Schedule A of the SPA provided that vacant possession of the property should be delivered within 42 calendar months from the date of the Approval Period or the Extended Approval Period.
- The Buyers claimed that both the approvals were obtained on 2nd August 2012. Therefore, the 42month period to deliver vacant possession should start from that date and vacant possession should have been delivered on 1 February 2016.
- Icon City disputed this calculation. They said the calculation of the date for delivery of vacant possession should either be:
1. From the date of the last building plan amendment which was later than 2nd August 2012; or;
2. From the expiry of the Approval Period and not the date the approvals were obtained. - Icon City delivered the vacant possession on September/October 2016.
- The Purchasers alleged that Icon City did not deliver vacant possession within the required 42 months period, which was due on 1 February 2016.
- The Purchasers then filed a claim for liquidated damages [late delivery damages] due to the delay in the delivery of the vacant possession under the SPA.
DECISION OF THE HIGH COURT (“HC”)
- The HC allowed the claim of the Purchasers.
- The HC held that the correct commencement date was 2 August 2012, which was the date of the first approval of the building plans by the local authority.
- The HC’s reasoning was that both approvals were obtained within the initial 12-month period, and that Section 10 of Schedule A of the SPA was clear that the computation for the delivery of vacant possession begins from the date of the approval and not the expiry of the Approval period.
- The HC also held that the SPA did not state that the 42 months should begin from the expiry of the approval period and any amendments to building plans did not reset the period.
- Not being happy Icon City appealed to the Court of Appeal.
DECISION OF THE COURT OF APPEAL (“COA”)
- The COA agreed with the decision of the HC.
- Icon City then appealed to the Federal Court.
DECISION OF THE FEDERAL COURT (“FC”)
- The FC, in dismissing the appeal, held, that the 42 months to deliver vacant possession should run from 2 August 2012, which was from the date of the approval of the Building Plans.
- The expression “the date of the Period of Approval” could only mean the date that fell within the Approval Period and not from the expiry of the said period.
- The FC held that since the agreement is a commercial agreement, the clauses then must be interpreted in a business common sense manner, and there is no rationale for postponing the date since the building plans were already approved.
- Where the grammatical meaning of the definition of “Building Plans” would be wide enough to cover even the Last Approved Plans, the context did not admit it for the purposes of determining the time for delivery of vacant possession.
- There is no ambiguity in regards to the to the timelines, and even if there were, it should be resolved in favour of the Purchasers since the SPA was drafted by the developer and ought to be interpreted contra proferentem or against the party who drafted the contract.
Leave a Comment