Vacation Home or Nightmare in disguise?

Case note on Tan Tien Seng & Chua Ah Hooi v. Grobina Sdn Bhd [2005] 7 CLJ 70 on the limits imposed on developers’ rights to make unilateral changes.

 

 

The case of Tan Tien Seng is significant to both property purchasers and property developers as it limits the circumstances in which a developer may make changes to or deviations from building plans without the consent of the purchaser.

 

 

BACKGROUND

The Purchasers entered into a Sale and Purchase Agreement (“SPA”) to purchase a penthouse unit of a condominium project in Malacca from the Developer. The unit, to be located on the highest floor of the building, was intended by the Purchasers to be a vacation home.

 

Before entering into the SPA, the Purchasers informed the Developer’s representative that they wanted to purchase the unit which was to be constructed on the 16th floor i.e. the highest floor of the building. The Storey Plan in the SPA showed that the condominium project would consist of 16 floors.

 

When the condominium was completed, the Purchasers were informed to inspect and take vacant possession of the unit. It was only then that they discovered that the Developer had built an additional unit above the Purchasers’ unit. In other words, an additional 17th floor had been constructed. The Purchasers objected to this deviation from the building plan which had been effected without their prior written consent. Upon the failure of the Developer to rectify the deviation, the Purchasers terminated the SPA on the ground that there was a fundamental breach of an essential term of the contract by the Developer in failing to deliver a penthouse unit to them.

 

The Purchasers sought a declaration from the Court that the Developer had breached the SPA and that the Purchasers had effectively rescinded the SPA ab initio. The Purchasers also sought various other reliefs, including a refund of the purchase price, repayment of expenses incurred in purchasing the unit as well as damages, interest and costs.

 

The Developer denied that it had committed a breach of contract. It argued that the unit delivered was the particular unit purchased by the Purchasers. The unit was fully completed and was neither flawed nor uninhabitable. The 17th floor only occupied a part of the roof of the Purchasers’ unit. As such, there was no fundamental breach or total failure of consideration.

 

The Developer contended that the discrepancies between the completed building, which had an additional floor, and the plan were required and approved by the Appropriate Authority. The Developer relied on Clause 12 of the SPA which read as follows:-

 

“The said Parcel … shall be constructed … in accordance with the description set out in the Fourth Schedule hereto and in accordance with the plans approved by the Appropriate Authority which description and plans have been accepted and approved by the Purchaser, as the Purchaser hereby acknowledges. No changes thereto or deviations therefrom shall be made without the consent in writing of the Purchaser except such as may be required by the Appropriate Authority…”* (Emphasis added)

* Clause 12 of the SPA is a standard wording adopted from clause 14 of Schedules G & H of the Housing Development (Control and Licensing) Regulations 1989

 

Although the Developer also contended that the construction of the 17th floor arose as a result of structural difficulties, it did not call its civil and structural engineer, architect or any officer from the Appropriate Authority to testify as to the necessity of the additional floor.

 

 

DECISION

The High Court Judge gave judgment in favour of the Plaintiffs and granted the reliefs sought by them. The High Court Judge held as follows:-

 

a) The Housing Development (Control and Licensing) Act 1966 (“the Act”) and the Housing Development (Control and Licensing) Regulations 1989 are intended to accord protection to housing purchasers (S.E.A. Housing Corporation Sdn Bhd v. Lee Poh Choo [1982] 2 MLJ 31);

b) As the Act is a piece of social legislation, its provisions should be given a liberal and purposive interpretation i.e. to promote the general legislative purpose underlying the provisions (Tribunal Tuntutan Pembeli Rumah v. Westcourt Corporation Sdn Bhd & Other Appeals) [2004] 2 CLJ 617);

c) To come within the ambit of changes or deviations which are “required by the Appropriate Authority” as contemplated under Clause 12, it is essential that the initiative for such changes or deviations must originate from or be required by such authority. Changes and deviations initiated by a Developer or its engineer or architect do not fall within the ambit of that provision even though approval of the Appropriate Authority is sought and obtained;

d) The Developer’s failure to call any officers from the Appropriate Authority to testify that construction of the additional floor was a deviation or change required by the Appropriate Authority gave rise to an adverse inference under sec. 114(g) of the Evidence Act 1950 that such evidence, if produced, would be unfavourable to the Developer;

e) The intention of the parties at the time the SPA was executed was that the Purchasers’ unit was to be located on the highest floor and that there should not be any other floor above it. This was expressly provided in Schedules 1 and 4 of the SPA which, by virtue of Clause 30, formed an essential part of the SPA. The Developer’s failure to fulfil this term in its entirety constituted a fundamental breach which entitled the Purchasers to rescind the SPA under sec. 40 of the Contracts Act 1950.

 

 

SIGNIFICANCE

Tan Tien Seng v. Grobina Resorts Sdn Bhd is the first reported case where the purchaser of a penthouse unit filed a claim against the Developer for failure to deliver a penthouse unit situated on the highest floor of the building. It is also noteworthy as it establishes that where an SPA permits a developer to make changes to or deviations from the building plans if so required by the Appropriate Authority, a developer who initiates such changes or deviations unilaterally cannot rely on this provision even if they are approved by the Appropriate Authority.

 

 

SHARON TAN GEOK BEE ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 
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