Today, the Kuala Lumpur High Court, before Yang Arif Nixon Anak Kennedy, dismissed the appeal brought by both the Property Developer and the registered Land Proprietor, and upheld the decision of the Kuala Lumpur Sessions Court.
We acted for the successful Purchaser in this matter.
The appeal raised a number of issues. While many of them were relatively ‘routine’, 2 aspects in particular stood out, namely, the liability of a registered Land Proprietor under a tripartite Sale and Purchase Agreement (“SPA”), and the application of the Force Majeure clause in the context of delay.
Delay That Led to a Larger Question
In our case, the dispute arose from a significant delay in the delivery of vacant possession of a commercial property unit.
Our Client, a purchaser of a commercial property, had been waiting for the handover of the unit well beyond what had been contractually agreed. Despite repeated communication and attempts to resolve the issue, there was no meaningful engagement from the Property Developer. Instead, the position maintained was that liability did not extend to both the Property Developer and the landowner, without any real effort to address or mitigate the delay faced by our Client.
Our Client ultimately instructed us to commence proceedings, not only against the Property Developer, but also against the registered Land Proprietor named as a party to the SPA.
What began as a Liquidated Ascertained Damages (LAD) claim ultimately raised a key issue:-
- When a project involves both a property developer and a landowner, who is actually responsible to the purchaser in the event of delay in vacant possession?
Why the Landowner Remained Liable Under the SPA
In our case, the Landowner argued that it should not bear responsibility for the delay, on the basis that it did not carry out the development works, and that construction and delivery were matters for the Property Developer alone. It was further argued that, pursuant to a Power of Attorney (POA) and internal arrangements between the parties, the Property Developer had assumed ‘full responsibility’ for the project and would indemnify the Landowner against any claims arising from it.
The High Court did not accept that position.
The Court did not concern itself with how responsibilities were ‘arranged internally’ between the Property Developer and the Landowner. Instead, the Court’s focus was directed to the governing SPA. In our case, the SPA was structured as a tripartite agreement, entered into between our Client (the buyer), the Property Developer, and the Registered Land Proprietor. That structure ultimately shaped the outcome of the case.
Against that framework, the position became clear. The landowner was not a ‘stranger’ to the SPA, but an express party. Our Client contracted on that basis and was not privy to any internal arrangements between the Property Developer and the landowner.
In those circumstances, the High Court held that the landowner could not rely on such ‘internal arrangements’ to avoid liability under the SPA. A party who enters into a contract in that capacity cannot subsequently recast its role to evade responsibility. The contractual framework of the SPA governs.
The Application of the ‘Force Majeure Clause’ Was Also Tested
The application of the Force Majeure clause was also tested in our appeal.
The Property Developer sought to justify the delay by relying on external circumstances, including the pandemic. It was contended that such events warranted an extension of time and displaced its obligation to deliver vacant possession within the contractual timeline.
The High Court did not accept that reliance at face value.
The Court emphasised that a Force Majeure clause does not operate as a “blanket excuse”. Its application must be supported by very specific evidence. It is not sufficient to point to general circumstances. A party invoking such a clause is required to establish, with particularity, how the delay arose, how those circumstances affected the particular unit, and what steps were taken to mitigate the impact of the delay.
In our case, there was no such evidential foundation. The Property Developer simply failed to establish any ‘clear causal link’ between the events relied upon and the delay, and merely exhibited multiple extensions of time granted by its architect, without any supporting evidence of causation and/or mitigation.
In those circumstances, the High Court found that the reliance on force majeure could not be sustained.
Conclusion
In our case, both the Sessions Court and the High Court made clear findings that the delay in the delivery of vacant possession was not justified, and that both the Property Developer and the registered land proprietor remained liable to our Client under the SPA. Such liability could not be avoided by reliance on “internal arrangements” and/or unsupported assertions of force majeure.
For purchasers, particularly of commercial properties, the position is straightforward: where there is delay in the delivery of vacant possession, your rights are not confined to the developer alone. Where the contractual structure allows it, liability may extend to both the developer and the landowner.
Developers and landowners may seek to resist liability by advancing positions that are ‘misconceived and untenable’. Such positions will not be upheld where the contractual framework and the facts do not support them.
Where such issues arise, it is often prudent to seek clarity on your rights at an early stage. Where necessary, we take a firm and uncompromising approach to enforcing those contractual rights.