Citation: Md Dahlan, Nuarrual Hilal. (2011). Legal Issues in the rehabilitation of abandoned housing projects of the liquidated housing-developer-companies in Peninsular Malaysia. European Journal of Social Sciences, 23 (3). pp. 392-408. ISSN 1450-2267.
Abstract: Abandoned housing projects is one of the biggest problems in the housing industry in Peninsular Malaysia. Even though since the Independence days in 1957, the Malaysian Government have provided laws and policies to govern housing industry, yet abandoned housing projects problem is still an unsettled issue until today.The real victims are the purchasers themselves.Usually when a housing developer company is wound up, the affair and business of the company are taken over either by the private liquidator or provisional liquidator or the official Receiver (OR) under the Department of Insolvency.The liquidator may rehabilitate the abandoned projects left by the wound up housing developer companies, if the projects are viable for rehabilitation with the approval of the creditors, contributories, the committee of inspection and the court and that there is adequate fund to finance the rehabilitation. Otherwise, if the project is not viable, particularly because there are insufficient funds to run the rehabilitation, the projects may be stalled forever without any prospects for rehabilitation, to the detriment of the purchasers. This article discusses the law and practice in the rehabilitation of abandoned housing projects in Peninsular Malaysia of the wound-up-housing-developer-companies.At the ending part of this article the author proposes certain suggestions for facing the problems of abandoned housing projects of the wound up housing developer companies and their rehabilitation in Peninsular Malaysia.
Keywords: Failed Residential Projects, Rehabilitation, Purchasers’ Grievances, Remedies, Liquidated Housing Developer Companies.
A question can be raised viz whether the liquidator is under a responsibility to revive the abandoned housing projects of the wound up companies?… it is opined that the liquidator is liable to carry out rehabilitation. Nonetheless this is subject to the sanction/authority of the creditors, contributories, committee of inspection and the Court, as the case may be (section 236(1)(3) and section 237(1) of the Companies Act 1965 (‘CA’)). If these parties (the creditors, contributories, committee of inspection and the Court) do not allow the liquidator to carry out the intended rehabilitation, the liquidator shall not carry on the same. Yet, in the opinion of the author, even these parties (creditors, contributories and committee of inspection) are not agreeable to such a request, the aggrieved purchasers may invoke Order 92 rule 4 of the High Court’s Rules 1980 (inherent power of the Court) and section 23(1) of the Courts of Judicature Act 1964 to request the Court to rely on its inherent power acceding the aggrieved purchasers’ request to have the abandoned housing projects be rehabilitated by the liquidator on the ground of public interest.
The refusal to allow rehabilitation may be because there are not enough funds to finance the rehabilitation costs and other grounds which may cause the intended rehabilitation is not feasible. Thus in this circumstance, the aggrieved purchasers have no redress to have their abandoned housing projects be revived or at least to get appropriate compensation and damages from the wound up housing developer companies.
Nonetheless, if the liquidator is of the opinion that it is viable for implementing rehabilitation of abandoned housing projects yet this is still rejected by the creditors or contributories or the committee of inspection, as the case may be, the liquidator may apply to the Court for directions to obtain the required authority and sanction to proceed with the intention to rehabilitate the abandoned housing projects pursuant to section 237(3) of the CA.
On the other hand, insofar as the situation in Peninsular Malaysia is concerned, if the liquidator of the company is the Official Receiver (OR), he may not carry out the rehabilitation. The reasons are as follows:
1) the official assignee has insufficient knowledge and expertise to warrant them to carry out the rehabilitation; and,
2) the official assignee has insufficient staff and manpower to enable them to resume the construction or to rehabilitate the projects.
The most that the Official Receiver (‘OR’) or, sometimes, the private liquidator, may do is to find eligible third party buyer to buy up the project together with the liabilities of the wound up housing developer companies. The proceeds of the sale are to be used to pay off the debts of the creditors of the companies in accordance with section 292 of the CA (Priorities of Payment). …
However, if the private liquidator is appointed, in most cases, there is a possibility that they will rehabilitate the abandoned housing projects….Nonetheless, the private liquidator may not so proceed with the rehabilitation if there is insufficient fund to revive the projects or the project is too difficult for rehabilitation….
Logically, the liquidators are liable to carry out rehabilitation and be subject to the provisions of the Housing Development (Control and Licensing) Act 1966 (Act 118), insofar as this is reasonable and within their power and capability. Nevertheless, insofar as the author’s scrutiny none in the case law and in practice, the liquidator are subject to Act 118 and under any duty (legal and statutory) to rehabilitate the abandoned housing projects. The reasons are provided above, i.e no sufficient funds, no expertise and shortage of manpower. On the other hand, it is argued, to impose statutory and legal duty for carrying out rehabilitation and be subject to the provisions of Act 118 is unfair and inequitable to the liquidators. This is being so as the primary duty of the liquidator, insofar as the insolvency law in Malaysia is concerned, is to carry out the business and affairs of the wound up companies to settle the debts of the petitioning creditors and other secured and unsecured creditors. In other words, once a housing developer companies are wound up under the CA, the housing development business carried out are also defunct. The liability to carry on the development by the liquidators, in favour of the aggrieved purchasers, (even though they (the liquidators) can be considered the permitted assigns or successors in title to the wound up companies), cannot be imposed or presumed on part of the liquidators. One of the reasons is that there is nothing in the CA which provides a duty on the liquidators to protect the rights of the purchasers/customers of the wound-up-company, unless, it is expedient and necessary in the opinion of the creditors, the contributories, the committee of inspection and the Court in the course of managing the winding up process and insolvency administration.
Following the above contention, in abandoned housing projects in Peninsular Malaysia whose housing developer companies have been wound up, there is a strong possibility that the liquidator (OR or the private liquidator) may not rehabilitate the project in the protection of the purchasers’ interests. This also means that, unless the project is taken over by a white knight and new funds are injected into the rehabilitating parties to finance the intended rehabilitation, the projects will be stalled forever without any relief and the interests and rights of the purchases will be detrimental.
It should be noted, provided that there is enough funds to run rehabilitation and the liquidator is willing to undertake rehabilitation of abandoned housing projects, in carrying out the business and affair of the wound up company, and that the creditors, creditors, committee of inspection or the Court having consented, the liquidator (OR and private liquidator) may appoint special manager to help them in executing the duties and to smooth out the rehabilitation works. This is provided in section 246(1) and (2) of the CA. This special manager, it is opined, may consist of project manager or architect or engineer or building contractor to assist the liquidator to rehabilitate the abandoned housing projects…