From the recent Court of Appeal decision in Rumaya Properties Sdn Bhd v Seacera Development Sdn Bhd [2023] 6 AMR 781, it appears possible to avoid liquidated and ascertained damages (“LAD”) by disabling oneself from performing and breaching the contract.
Background
To maintain focus, the narrative below is limited to matters relevant to LAD; the litigation also involved other issues but they have not been included.
Antara Vista was the owner and developer of a piece of land in Selangor. In 2005, Rumaya entered into sale and purchase agreements (“SPAs”) to purchase 18 medium cost apartments from Antara Vista, vacant possession of which is to be delivered by Antara Vista to Rumaya by 18 May 2008. See paras 3, 4.
Unfortunately, the construction of those apartments was abandoned due to financial problems faced by Antara Vista (para 5).
In 2007 and about a year before the deadline for vacant possession, Antara Vista sold its land to Seacera. The land was transferred to Seacera in March 2008 pursuant to the sale, after which Seacera proceeded to develop a different project i.e. a high-end condominium. See para 6.
Consequently, the medium cost apartments were never delivered to Rumaya (para 6).
In 2010, Rumaya filed an action in the High Court (“HC”) against both Seacera and Antara Vista. One of the reliefs sought was specific performance of the SPAs (para 7). In essence, specific performance would require the defendants to deliver vacant possession of the medium cost apartments to Rumaya.
Four years later in 2014, the HC granted judgment after trial in favour of Rumaya against Seacera and Antara Vista, including ordering specific performance of the SPAs (para 8).
Both Seacera and Antara Vista appealed against that decision to the Court of Appeal (“CA”). Where Antara Vista’s appeal is concerned, the CA in 2017 dismissed the appeal against liability, but allowed the appeal against the order for specific performance; that order was set aside and damages in lieu was awarded. Those damages – to be paid by Antara Vista to Rumaya – were ordered to be assessed. See para 11. I shall refer to this as the “1st CA decision”.
The Federal Court subsequently affirmed the 1st CA decision (para 14).
Thereafter, the assessment of damages was carried out by the HC. One of the damages claimed by Rumaya was LAD under the SPAs – alternatively, loss of rental – due to Antara Vista’s failure to deliver vacant possession on time. This claim was dismissed by the HC in 2022, after which Rumaya appealed to the CA.
LAD Not Claimable
The CA decided that LAD or loss of rental is not claimable because (i) Antara Vista is no longer able to deliver vacant possession of Rumaya’s apartments (referring to the refusal of specific performance, per the 1st CA decision); and (ii) actual delivery of units could never take place since the project “never materialized” (para 55).
Comments
It is not easy to reconcile the decision with principle, on close analysis.
Firstly, and as a starting point, Rumaya’s right to LAD would accrue – and LAD would start to run – on 19 May 2008, upon Antara Vista’s failure to deliver vacant possession by the deadline of 18 May. This would be the position unless there is a finding of some event that had the legal effect of precluding that right from accruing on 19 May in the first place, such as:
– the SPAs were void from the beginning;
– the SPAs were terminated or frustrated before the 18 May deadline; or
– there was an implied term that no LAD would arise should Antara Vista sell the land and disable itself from delivering vacant possession to Rumaya.
No such finding was made by the CA.
Secondly, having accrued on 19 May, the right to LAD cannot be extinguished unless it is compromised by Rumaya (through waiver, settlement or otherwise) or by some Act of Parliament. Neither event was in play in this case.
That being so, Rumaya’s right to LAD has accrued and has not been subsequently extinguished.
Consequently, it is difficult to see how Antara Vista’s inability to deliver vacant possession can be a valid defence to Rumaya’s claim for LAD. As noted by the CA, Antara Vista breached the SPAs when it disposed of the land to Seacera (para 55). As such, Antara Vista should not be able to rely on its own breach to fend off the claim. This was argued by Antara Vista (para 53), but does not appear to have been addressed head on by the CA (para 55).
As for the refusal of specific performance:
a) This occurred only in 2017 when the 1st CA decision was pronounced. Rumaya’s right to LAD had already accrued by that time. How a refusal of this remedy in 2017 can result in the negation of a contractual right that accrued in 2008 is not explained.
b) Such refusal does not mean that the SPAs were wholly unenforceable. On the contrary, the SPAs were enforced in terms of monetary compensation, when damages were awarded in lieu of specific performance. The claim for LAD is a claim for monetary compensation.
Taking into account all the above, it now appears possible to avoid LAD by breaching the contract and disabling oneself from performing.
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