Property Law Shake-Up: High Court Rules Against Developer, Awards RM309,225 for Delayed Occupancy

In Daniel Ong Beng Chong & Anor v Alpine Return Sdn Bhd [2025] CLJU 115, the High Court allowed the purchasers’ appeal, overturning the Sessions Court’s dismissal of their claim for breach of contract. The Court declared the delivery of vacant possession invalid and held that Section 39.1 of the Sale and Purchase Agreement (SPA), which permitted delivery upon issuance of a Certificate of Practical Completion (CPC) without the Certificate of Completion and Compliance (CCC), thereby denying the purchasers immediate occupancy, is exploitative, unjust, and void under section 24(e) of the Contracts Act 1950 as contrary to public policy. This ruling underscores the courts’ role in balancing freedom of contract with fairness, particularly in protecting purchasers in unequal bargaining positions from terms that undermine their right to enjoy fully paid properties.

Background of the Case

This dispute arose from the purchase of a commercial unit in Star Boulevard, Kuala Lumpur, at a price of RM6,759,172.00. On 7 August 2014, the purchasers, Daniel Ong Beng Chong and Connie Ong Mei Ling, entered into an SPA with the developer, Alpine Return Sdn Bhd, requiring delivery of vacant possession within 48 months from the project development plan approval on 23 July 2014—thus due by 23 July 2018. On 22 July 2018, the developer issued a notice of vacant possession, stating that a CPC had been obtained from its architect. However, no CCC was issued, preventing occupancy under section 70(27)(f) of the Street, Drainage and Building Act 1974 (SDBA), which imposes severe penalties for unauthorised occupation. The purchasers faced additional barriers: incomplete keys, restricted access requiring appointments, a locked entrance with a “no entry” sign, and ongoing construction. In 2020, they sued in the Sessions Court for a declaration of invalid delivery, liquidated ascertained damages (LAD) of RM309,225.61 for late delivery (alternatively general damages), interest, and costs, alleging breach of the SPA. The Sessions Court dismissed the claim, finding the CPC valid per the SPA terms. Dissatisfied, the purchasers appealed to the High Court in 2023, focusing on the validity of the CPC without CCC, the denial of occupancy rights, and whether Section 39.1 of the SPA contravened public policy by exploiting the purchasers’ weaker position.

High Court’s Decision

1. CPC Invalid Without CCC: The Court held that the CPC was not validly issued, as it failed to comply with underlying requirements, including prior issuance of the CCC and relevant Form G certifications under the main construction contract. Expert testimony from both sides confirmed that a CPC cannot stand alone without these, rendering the purported delivery of vacant possession ineffective and illusory.

2. Clause Exploitative Due to Bargaining Imbalance: Recognising the purchasers’ weaker position compared to the developer, the Court found Section 39.1 exploitative, as it allowed “delivery” without granting immediate occupancy despite full payment and compliance by the purchasers. This created an unjust delay, taking advantage of the power imbalance in property transactions.

3. Void Under Public Policy (s. 24(e) Contracts Act 1950): Following precedents like Yogananthy A S Thambaiya v Harta Pusaka Idris Osman [2020] 6 CLJ 151, the Court declared Section 39.1 void as contrary to public policy. It emphasised that freedom of contract is not absolute; terms leading to unjust outcomes, undermining fairness, or eroding public trust in legal systems must be struck down, even if common in industry practice.

4. No Contravention of Street, Drainage and Building Act 1974 but Undermines Its Purpose: While the clause did not directly violate section 70(27)(f) SDBA’s occupancy prohibition, the Court ruled it contrary to the Act’s intent of ensuring safe, habitable properties. Delaying occupancy frustrates this goal and imposes undue hardship on purchasers.

5. Fairness and Justice Paramount: The judgment balanced industry concerns about potential disruption against protecting vulnerable purchasers, prioritising public policy goals of equity and immediate enjoyment of property rights upon delivery.

6. LAD and Remedies Awarded: With delivery invalid, the Court granted LAD of RM309,225.61 for late delivery, judgment interest at 5% per annum from the judgment date until full realization, and costs of RM20,000.00.

7. No Arbitrary Judicial Interference: The Court clarified its decision was grounded in established principles from cases like Nippon Express (M) Sdn Bhd v Che Kiang Realty Sdn Bhd & Another Appeal[2013] 7 CLJ 713 and Theresa Chong v Kin Khoon & Co [1976] CLJU 165, avoiding expansion of public policy heads beyond recognised categories.

Key Takeaways

1. Occupancy Rights Upon Delivery: Purchasers are entitled to immediate occupancy upon valid delivery of vacant possession; clauses decoupling possession from use may be deemed exploitative and void, reinforcing protections under the Contracts Act 1950.

2. Public Policy Overrides Contractual Freedom: Courts will invalidate SPA terms that exploit bargaining imbalances or lead to unjust outcomes, even if agreed upon, to uphold fairness and prevent erosion of trust in property dealings.

3. Validity of CPC Requires CCC: Developers cannot rely on CPC alone for delivery if CCC and supporting certifications are absent; such deliveries are invalid, exposing them to LAD claims.

4. Balancing Industry Practice with Justice: Common clauses delaying occupancy do not immunise against public policy scrutiny; developers must ensure terms align with statutory purposes like those in the SDBA for habitability and safety.

5. Purchaser Protections in Unequal Contracts: Buyers in weaker positions benefit from judicial intervention; due diligence on SPA terms is crucial, but courts will prioritise equity over strict adherence to unfair provisions.

6. Limitations on Developer Defenses: Claims of industry-standard practices or voluntary agreement do not shield against voidance if terms undermine public policy; focus on actual compliance and fairness to avoid liability.