In Tropika Istimewa Development Sdn Bhd v Wong Hang Fah & Ors [2025] CLJU 1146, the Court of Appeal unanimously allowed the developer’s appeal, overturning the High Court’s ruling in favor of the purchasers, and dismissed the purchasers’ cross-appeal. The Court affirmed that developers acting in good faith on valid approvals from authorities such as extensions for delivery of vacant possession and exemptions for lease-based sales in special economic zone project are protected under the “second actor theory”. This prevents retrospective invalidation of acts relying on the ministerial approvals, emphasizing reliance interests and the unique regulatory framework of projects in the Medini Iskandar Malaysia Special Economic Zone.
Background of the Case
The dispute arose from The Meridin @ Medini, a condominium project in Medini Iskandar Malaysia, a special economic zone which implements a Private Lease Scheme whereby buyers acquire a 99-year lease rather than freehold ownership. It is governed by guidelines from the Iskandar Regional Development Authority (IRDA) and the Johor Land Office.
The land was leased to Medini Land for 99 years. Tropika Istimewa Development Sdn Bhd (the developer), acquired this lease and entered into Sale and Purchase Agreements (SPAs) with purchasers for strata parcels, along with supplemental agreements for parking bays, with terms clearly outlining the lease-based transaction and a 48-month delivery period for vacant possession, approved by the Ministry of Housing (KPKT), exempting compliance with Schedule H of the Housing Development Regulations 1989 (HDR).
The developer delivered vacant possession within this period, issuing strata titles to confirm the purchasers’ leasehold interests. However, in 2018, the purchasers filed a High Court suit, alleging the SPAs were invalid, contravening the Housing Development (Control and Licensing) Act 1966 (HDA), HDR, National Land Code 1965 (NLC), and Strata Titles Act 1985 (STA), and sought liquidated ascertained damages (LAD) for late delivery.
The High Court ruled in favor of the purchasers, declaring certain SPAs invalid, ordering Schedule H compliance, and awarding damages and LAD which prompts the developer to file an appeal.
Court of Appeal’s Ruling
- Second Actor Theory Applies: The Court recognized the developer as the “second actor” having relied in good faith on KPKT’s approval (the “first act”) for the Private Lease Scheme and 48-months extension. Following Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd & Other Appeals [2024] 5 MLJ 879, invalidating the first act retrospectively would cause substantial injustice, as the developer had structured the project and SPAs accordingly.
- Prospective Application of Ang Ming Lee: The Federal Court’s ruling in Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor and other Appeals [2020] 1 CLJ 162 invalidate certain extensions under Regulation 11(3) HDR applies prospectively only. Applying it retrospectively would disrupt the housing industry and unfairly penalize developers who complied with laws valid at the time.
- Requirement for Direct Challenge: Purchasers, as “strangers” to KPKT’s administrative decision, are barred from collaterally challenging ministerial approvals in civil suits. Challenges should be pursued by judicial review proceedings under Regulation 12 HDR by adding the proper parties.
- SPAs Valid Under NLC and STA: The Court affirmed that the Private Lease Scheme complies with the IRDA Act 2007 and relevant guidelines. The issuance of strata titles validates the leasehold interest and confirms compliance with laws. Sections 218, 219, 221 and 340 of the NLC support the legality of the lease transfer, while Section 73 of the STA preserves other rights related to strata parcels.
- No Misrepresentation or Breach by Developer: Purchasers were estopped from claiming misrepresentation, having agreed to and benefited from the leasehold terms and the incentives of the Private Lease Scheme (such as exemption from the RM1 million foreign ownership threshold). The SPA and bank loan documents serves as evidence which confirmed their acknowledgment. The developer delivered vacant possession within the agreed 48-months’ timeframe, negating LAD claims.
- Public Policy and Reliance Interests: The judgment highlights the importance of preserving good faith reliance on ministerial approvals to avoid widespread legal uncertainty, litigation, and administrative disorder in the housing development sector.
- Cross-Appeal Dismissed: The purchasers’ sought recalculation of LAD from deposit payment dates instead of SPA execution dates. The Court held this issue was moot as delivery was timely under valid SPA terms.
Key Takeaways
- Protection for Good Faith Reliance: Developers in special economic zone projects can rely on ministerial approvals without risk of retrospective invalidation, pursuant to the second actor theory.
- Prospectivity in Judicial Overruling: Rulings such as Ang Ming Lee apply prospectively, balancing legal development with economic and contractual certainty for completed transactions.
- Proper Channels for Challenging Administrative Decisions: Collateral attacks on government approvals via civil suits are barred; judicial review is the appropriate remedy to directly contest such decisions.
- Unique Regulatory Frameworks in Economic Zones: Special projects governed by IRDA and related authorities, such as Medini Iskandar, feature differentiated schemes such as Private Lease which offer unique benefits and terms. Purchasers must exercise due diligence and are subject to caveat emptor.
- Estoppel and Purchaser Awareness: Buyers aware of special schemes and terms and benefitting from the incentives cannot later repudiate those terms. SPA recitals and bank representations are critical evidence.
- Limitations on LAD Claims: Extensions granted prior to Ang Ming Lee remain enforceable if acted in good faith. Claims for damages should focus on actual breaches rather than retrospective reinterpretations of valid agreements.
– By George Miranda, Joy Sam Jia Qian, Nurafiqah ‘Izzati –
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.
