Obata-Ambak v Prema Bonanza: Can Buyers Still Claim LAD After Ang Ming Lee?

Ang Ming Lee unsettled the housing industry. In Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan [2020] 1 MLJ 281, the Federal Court held that Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 (HDR) was ultra vires the parent Act. That regulation had let the Controller of Housing approve extensions of time beyond the 36 months in the statutory Schedule H agreement. Purchasers asked an obvious question: if those extensions were never valid, can we claim liquidated ascertained damages (LAD) for the extra months?

On 26 July 2024 the Federal Court answered in Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd, a decision on five appeals heard together. In the cases before it, the answer was no. This article sets out what the Court decided and why, and where the limits of the decision lie. For an earlier Federal Court ruling on when the LAD clock starts, see our article on the booking fee date decision, which is a separate question.

The Five Appeals at a Glance

A five-member panel decided all five appeals unanimously. Because the appeals involved public interest, the Court made no order as to costs.

Why the Purchasers Lost

1. The claims were time barred

Obata and Vignesh sued in 2020 for LAD calculated on the 36-month Schedule H period. The Federal Court applied Section 6(1)(a) of the Limitation Act 1953, under which an action founded on contract cannot be brought after six years from the date the cause of action accrued. A contractual cause of action accrues on breach.

Here the SPAs expressly stated 54 months, and the purchasers signed them knowing that. The Court said the purchasers were in effect challenging clauses they had agreed to, so time ran from the signing of the SPAs in 2012 and 2013, and the 2020 suits were out of time. It also pointed out that Obata and Vignesh had accepted LAD as full and final settlement in 2017 without raising the validity of those clauses. It answered the questions of law on this point in the negative: the SPA does not revert to a 36-month period, and the cause of action does not accrue only when three years expire.

2. Ang Ming Lee applies prospectively

Ang Ming Lee did not say whether it operated retrospectively. The Federal Court held that the doctrine of prospective overruling, including the exceptions recognised in Re Spectrum Plus, applies in Malaysia where a decision would disrupt an industry that had relied on a statutory regime, and that the greater the reliance, the greater the need for prospective effect. It reasoned that the regulation was valid when the extensions were granted, developers and the Controller had relied on it, and treating every earlier extension as void would cause serious injustice and disruption to the housing industry. Its conclusion was that the principles in Ang Ming Lee do not apply to extensions granted by the Controller before Ang Ming Lee.

3. The purchasers would have been unjustly enriched

The Court applied the principle of unjust enrichment recognised in Dream Property v Atlas Housing [2015] 2 MLJ 441. The purchasers had agreed to the extended period, taken vacant possession and accepted LAD for the delay, so they suffered no loss. The Court said Ang Ming Lee is not a "carte blanche" for purchasers to claim LAD retrospectively and take a financial windfall. It also found that the developers had complied with the law as it stood and had not acted unconscionably.

4. The Second Actor theory protected the developer

The Sri Damansara appeal raised a different point. The developer had relied on the Controller's extension, which was granted before the SPA was signed. The Court accepted that the Second Actor theory, endorsed by the UK Supreme Court in R (Majera) v Secretary of State for the Home Department [2022] AC 461, applies where an innocent party relied on an earlier public decision later declared ultra vires. It added that the purchasers were strangers to the Controller's decision and so could not attack it collaterally, because they had not challenged it by judicial review. The Court stressed that it was not revisiting or departing from Ang Ming Lee.

What the Decision Does Not Settle

The Court's reasoning is closely tied to its facts: extensions granted before Ang Ming Lee, SPAs that stated the extended period, delivery completed and LAD for the delay paid and accepted. Our reading is that the decision does not give developers a blanket answer. A purchaser or developer whose position differs, for example because an extension was granted later or was never reflected in the SPA, should take advice and not assume the same result.

The decision also does not remove a purchaser's contractual rights. In Obata and Vignesh the developer had paid LAD for delay beyond the period stated in the SPA. A claim for delay beyond the agreed period remains a claim under the SPA, subject to limitation.

Practical Points

For purchasers

• Read clauses 25 and 27 of your SPA to see the completion period you agreed and whether an extension of time was approved before you signed.
• Limitation matters. A contract claim is barred six years after the cause of action accrues, and the Federal Court treated accrual as the breach of the SPA terms. Do not wait.
• Think before signing a full and final settlement or waiver. The Court gave weight to the 2017 settlements in Obata and Vignesh.
• Keep your SPA, the notice of vacant possession, payment records and any correspondence about delay.

For developers

• Keep the Controller's extension approvals and show that they pre-dated the SPAs where that is the case.
• Make sure the SPA states the extended period clearly, since the Court relied on the purchasers having agreed to it.
• Document LAD payments and any settlements. These supported the unjust enrichment and limitation findings.

For a wider view of buying property in Malaysia, see our property due diligence checklist. If you have a late delivery or an extension of time dispute, our property lawyers can review your sale and purchase agreement and advise on your options. This article is general information and not legal advice.

Key Takeaways

• The Federal Court held on 26 July 2024 that Ang Ming Lee applies prospectively and does not apply to extensions of time granted by the Controller before it.
• The purchasers' LAD claims were time barred under Section 6(1)(a) of the Limitation Act 1953, with time running from the signing of the SPAs that stated the extended period.
• Allowing the claims would have unjustly enriched purchasers who had agreed to the extended period, taken possession and accepted LAD.
• The Second Actor theory protected a developer that relied on an extension later declared ultra vires, and purchasers who were strangers to it could not attack it collaterally.
• The decision turns on its facts. Anyone in a different position should take advice.

Sources: Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd, Federal Court (Civil Appeal Nos. 02(i)-70-08/2022(W) and related appeals), judgment available as a PDF. Ang Ming Lee [2020] 1 MLJ 281.

Angie Neoh Managing Partner · Real Estate Angie advises on acquisitions and disposals of property, financing documents, and commercial and industrial leases and tenancies. She has acted for property developers, multinational corporations, government-linked entities and foreign investors. View profile