Court of Appeal: Can Purchasers Reopen A Fully Settled LAD Claim?

𝐏𝐑𝐎𝐏𝐄𝐑𝐓𝐘 𝐋𝐀𝐖 𝐔𝐏𝐃𝐀𝐓𝐄 – 𝐄𝐏𝐈𝐒𝐎𝐃𝐄 51
Court of Appeal: Can Purchasers Reopen A Fully Settled LAD Claim?

In Ekovest Capital Sdn Bhd v Tan Tiong Hwa & Anor, the Court of Appeal considered whether purchasers who had accepted liquidated ascertained damages (“LAD”) and signed full and final settlement letters could subsequently claim additional LAD by relying on court decisions issued after the settlement.

The purchasers had received their keys, deposited and retained the LAD payments, occupied their parcels and signed letters expressly waiving all further claims relating to the parcels and common facilities. They did not protest when accepting the payments and never returned the settlement sums.

The Court of Appeal held that the settlement letters constituted a binding accord and satisfaction which fully discharged the developer’s liability for LAD. The purchasers could not retain the benefits of the settlement and later reopen their claims merely because subsequent decisions suggested that a more favourable LAD calculation might have been available.

The Court explained that once the delay had occurred and the LAD claim had arisen, the developer and purchasers could validly agree on a final settlement. This was not an unlawful removal of the purchasers’ rights under Schedule H. The Court also considered whether a Partial CCC was sufficient for vacant possession and how any rebate should be treated when calculating LAD.

BACKGROUND OF THE CASE

Ekovest Capital Sdn Bhd was the developer of the EkoCheras mixed development in Kuala Lumpur. The purchasers acquired two residential parcels in the development, namely Parcel J-20-11 and Parcel J-27-01.

Before the SPAs were signed, Ekovest obtained an extension of time from the Controller on 18 October 2013. The extension increased the period for completion and delivery of vacant possession from 36 months to 48 months.

The purchasers had paid booking fees of RM10,000 for each parcel on 7 September 2013. The SPA for Parcel J-20-11 was executed on 16 December 2013, while the SPA for Parcel J-27-01 was executed on 10 April 2014.

Under the approved extension, Ekovest was required to deliver vacant possession and complete the common facilities within 48 months from the respective SPA dates. The dispute later arose when the purchasers sought further LAD despite having accepted LAD payments and signed settlement letters stating that the payments were in full and final settlement.

CHRONOLOGY OF THE FINANCING, DISPUTE AND COURT PROCEEDINGS

7 September 2013 — The purchasers paid booking fees of RM10,000 for each residential parcel.

18 October 2013 — The Controller granted Ekovest an extension of time, increasing the completion period from 36 months to 48 months.

16 December 2013 — The SPA for Parcel J-20-11 was executed.

10 April 2014 — The SPA for Parcel J-27-01 was executed.

2 May 2019 — Ekovest issued Notices of Vacant Possession for both parcels. A Partial Certificate of Completion and Compliance, or Borang F1, was issued on the same date for the residential blocks containing the purchasers’ parcels.

16 May 2019 — Vacant possession was deemed delivered. The purchasers received their keys and LAD payments and signed settlement letters relating to the residential parcels.

27 June 2019 — The purchasers signed further settlement letters for LAD relating to the common facilities, confirming that the payments were accepted in full and final settlement. They retained the payments, accepted the keys, occupied the parcels without protest and never returned the settlement sums.

13 September 2019 — The Full CCC for the development was issued.

26 November 2019 — The Federal Court delivered its decision in Ang Ming Lee concerning the validity of extensions of time under the Housing Development Regulations.

24 February 2020 — Approximately nine months after signing the settlement letters, the purchasers commenced proceedings in the Sessions Court for additional LAD.

27 July 2021 — The Sessions Court allowed the purchasers’ claims.

27 August 2024 — The Federal Court delivered its decision in Obata-Ambak, clarifying that Ang Ming Lee did not retrospectively invalidate extensions of time granted before that decision.

6 January 2025 — The High Court upheld part of the purchasers’ claim and awarded balance LAD.

28 April 2025 — A Consequential Order recorded that the 48-month extension of time was valid and binding.

28 July 2026 — The Court of Appeal allowed Ekovest’s appeal and dismissed the purchasers’ claims for additional LAD.

WERE THE SETTLEMENT LETTERS BINDING?

The central issue was whether the purchasers could claim further LAD after accepting the payments and signing settlement letters which clearly stated that the sums were in full and final settlement of all claims relating to the parcels and common facilities.

The purchasers received their keys, deposited and retained the settlement cheques, and occupied the parcels without protest. Although they later claimed that they had signed the letters to obtain the keys and payments, no duress or coercion was pleaded, and the settlement sums were never returned.

The Court of Appeal held that the settlement letters amounted to a valid and binding accord and satisfaction under section 64 of the Contracts Act 1950. By accepting the payments in exchange for a full discharge, the purchasers had agreed to bring their accrued LAD claims to an end.

The purchasers could not retain the money, keys and possession while later rejecting the settlement and claiming additional LAD. The Court emphasised that a concluded settlement cannot be reopened merely because later court decisions might have produced a more favourable LAD calculation.

WAS THE SETTLEMENT AN UNLAWFUL ATTEMPT TO CONTRACT OUT OF SCHEDULE H?

The purchasers argued that LAD was a statutory protection under Schedule H and that such protection could not be waived or removed through the settlement letters.

The Court explained that a developer cannot, before any delay or dispute arises, impose terms which reduce, exclude or vary the purchaser’s statutory rights. Any such attempt may amount to unlawful contracting out of Schedule H.

However, the position is different once the delay has already occurred and the purchaser’s LAD claim has accrued. At that stage, the developer and purchaser may agree on a final amount to settle the existing claim, just as parties may settle any other monetary dispute.

The Court therefore held that the settlement letters did not unlawfully alter the terms of Schedule H. They merely resolved the purchasers’ accrued LAD claims through a valid post-breach settlement which was binding on both parties.

PJD REGENCY AND THE PARTIAL CCC

The purchasers relied on PJD Regency to argue that LAD should be calculated from the date the booking fees were paid rather than from the respective SPA dates.

The Court explained that PJD Regency only determines how LAD should be calculated where a valid claim still exists. It could not revive the purchasers’ LAD claims because those claims had already been fully settled and discharged in 2019.

The Court also considered whether vacant possession could validly be delivered using a Partial CCC. In this case, the Partial CCC covered the whole of the purchasers’ residential blocks, while the common facilities had already been certified as completed.

The remaining compliance matters mainly concerned the separate hotel block. The Court therefore held that vacant possession delivered on 16 May 2019 was valid and that LAD should not continue until the Full CCC was issued on 13 September 2019.

HOW SHOULD THE REBATE BE TREATED?

The Court considered whether LAD should be calculated using the original purchase price stated in the SPA or the lower price actually paid after deducting the rebate.

It held that, if any further LAD had been payable, the calculation should be based on the net purchase price after the rebate. Calculating LAD on the higher price would compensate the purchasers for an amount they did not actually pay.

However, Ekovest could not demand repayment of the rebate as a separate debt merely because the purchasers had filed a claim. The rebate could reduce the price used to calculate LAD, but it could not be taken back from the purchasers.

The Court of Appeal ultimately allowed Ekovest’s appeal, dismissed the purchasers’ claims for additional LAD and affirmed the dismissal of Ekovest’s rebate counterclaim.

KEY TAKEAWAYS

1. Full and final settlement is binding

A purchaser who accepts LAD, signs a clear full and final settlement, keeps the payment and takes possession may be prevented from claiming further LAD later.

2. Post-breach settlement is valid

A settlement made after the delay has already occurred does not unlawfully remove the purchaser’s rights under Schedule H. It is a valid settlement of an LAD claim that has already arisen.

3. Later decisions cannot revive a settled claim

A later court decision cannot reopen an LAD claim that has already been fully settled. In this case, the Partial CCC was also sufficient because it covered the purchasers’ entire residential blocks and the common facilities were completed.

4. Rebate affects LAD calculation

Any LAD payable should be calculated using the purchase price after deducting the rebate. However, the developer cannot demand repayment of the rebate as a separate debt merely because the purchaser filed a claim.

For further information, please contact Dato’ George Miranda at george@mirandasamuel.com.

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