Covid-19 Bill: Will this antidote for contracting parties be too little too late?

Inordinate delays in the Covid-19 legal shield has rendered it redundant and meaningless. But it is better to have an imperfect bill now than a perfect bill in the future.

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On August 12, 2020, the Temporary Measures For Reducing The Impact Of Coronavirus Disease, 2019 Covid-19 Bill, 2020 was tabled in Parliament for its first reading and on 25th August, the bill was passed at its third reading. However, this is not the end of the road for its implementation.

The purpose of the covid-19 Bill is to provide temporary measures to reduce the impact of the Covid-19 pandemic and to modify relevant provisions. In our previous article, we mooted the idea of a legal shield, time freeze and temporary suspension of all covenants to provide temporary relief, offer extension of time for rectification and to minimise legal entanglement. The question is, can the bill fulfill these purposes?

Alas, the proposed Covid-19 bill suffered inordinate delays for reasons only known to the government of the day. The bill may have just gotten approved at its third reading but it still has to go through the House of Senate that convenes from September 2 – 23, after which Royal assents to the law will be given. Finally, it will be gazetted and published as law. Given the pace, we anticipate the law to be implemented in early October 2020 – a rather optimistic projection that does not take into account further political interruptions.

Time and again we have warned the Government that delays in passing the law would prove fatal to all aggrieved parties. As early as April this year we have been highlighting the need for a law to freeze time and temporarily suspend all contracts so as not to cause further hardship to contracting parties with weaker bargaining powers than their counterparts. We have written articles on the issue and even liaised with people in high offices, hoping it would be tabled at the May 18 Parliamentary sitting.

Covid-19 Bill has a limited time window

Since the Movement Control Order (MCO) began on March 18, the effects of Covid-19 have been palpable with high unemployment, sluggish economy (both domestic and global) and a projected rise in Non-Performing Loans when the loan moratorium ends on September 30. Affected parties would have moved on once leases have expired with the passage of time, rendering any late Covid-19 bill redundant.

In most if not all contracts, there is always a stipulation that parties to a contract must perform their obligation within a certain time. Failure to perform will be considered an event of default and may trigger exercising of rights or remedies by the other contracting party. The proposed Covid-19 legislation was supposed to provide a legal shield to those unable to meet their obligations.

Much like how we must not be tardy with seeking treatment if we suspect we have contracted the virus, time is critical when it comes to this bill. It is impossible to undo the carnage of Covid-19 by passing the bill any later than now! A late Covid-19 Bill cannot salvage events which have been already been set in motion. One cannot legislate back to life a business that has already shuttered due to the owner’s failure to pay rent during the MCO.

READ: What is the impact of COVID-19 on Malaysia’s property market?

Do we let bygones be bygones?

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‘Better late than never’ does not apply in the case of Covid-19. In fact, it appears that many people who were living in hope of being able to rely on a Covid-19 law for temporary reprieve will be disappointed to know that there is a ‘savings clause’ aka ‘disclaimer clause’ that read inter-alia:

‘Notwithstanding Section 7 (Inability to perform contractual obligation), any contract terminated, any deposit or performance bond forfeited, any damages received, any legal proceedings, arbitration or mediation commenced, any judgment or award granted and any execution carried out for the period 18th March, 2020 until the date of publication of this Act shall be deemed to have been validly terminated, forfeited, received, commenced, granted or carried.’

It seems like we have to ‘bite the bullet’ and move on. Evidently, it all does not matter anymore when the party with the upper hand inflicted painful damage, no matter how legally justified it may be, on the weaker party. It would all be water under the bridge when those aggrieved parties, having suffered irretrievable predicament, initiate legal proceedings at our courts of law. As it is, our courts are already inundated with cases. This could have been prevented by quick action by our lawmakers. Alas, it was not to be. All the efforts by trade organisations, NGOs and vested parties are in vain.

Special Mediation Centre: Why reinvent the wheel?

The government says it will set up a special mediation centre to help resolve disputes arising from non-performance of contractual obligations.
On this issue, we feel that instead of mediation which includes the Minister’s appointment of a mediator, role of a mediator, conduct of mediation and conclusion of mediation by way of a Settlement Agreement, it should be the courts that resolve disputes and to grant relief, decide if cases fall within the ambit of Covid-19 or if the performance of a contract was materially impacted by Covid-19.

A special High Court should be designated for a prescribed period to preside over all Covid-19 related cases. After all, our Federal Constitution prohibits exclusion of jurisdiction of the courts. Furthermore, the appointment of a mediator in the Malaysian context is far too arbitrary. Any appointment may be politically tainted or industry influenced. This may result in justice being denied to the aggrieved party. Will costs be a deterrence to resolving disputes via mediation? The mediators’ fees may not be regulated and might be grossly inflated. The courts as neutral arbiters of disputes are more expeditious and cost-effective than mediation. Why must we reinvent the wheel when the legal process is already available? Already there is a process of mediation in courts where parties appear before the Registrar (sometimes presided over by judges) in their chambers to attempt out-of-court settlements.

We propose that the Covid-19 procedure at the High Courts be simplified. A prescribed form and checklist of documents can be furnished to the presiding judge to help with evaluation, assessment and decision on cases. Lawyers representing their clients should limit their fees to RM5,000, as otherwise the bill would defeat its purpose.

Can the bill address issues in housing contracts via modification to the Housing Development (Control & Licensing) Act, 1966?

developer delayed project

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Section 34 and 36 of the (modified) Housing Development Act (HDA) seeks to deal with late payment interests and defects liability period respectively. However, they require home purchasers to apply to the Minister for an extension to the period between March 18, 2020 to August 31, 2020 which has been excluded from the calculation of defects liability period.

This avenue to obtain an extension sounds good on paper. However, the mechanism for application, factors to consider for allowing extensions and timeline for the entire process is not stated and accords far too much powers to the Minister. The reading of the Bill is simple enough; the aggrieved purchaser may appeal to the Minister, citing reasons why he/she deserves an extension.

However, if all effected purchasers (if they are capable of even offering a valid explanation) were to write to the Minister, the Ministry will be overwhelmed with voluminous letters. They would have to structure the files, deliberate on each and every appeal through their internal committees and respond effectively, which will surely take time. Why take on more work?

The protection period should be automatically extended to December 31, 2020 without requiring purchasers to appeal. After all, by the time this becomes law, it would already be nearly the end of the year and irrelevant to both purchasers and developers.

Why is there no modification to the Strata Management Act, 2013 (SMA) under the bill?

We are still trying to figure out why there is no modification to the SMA under the Covid-19 Bill to address the following: delays in conducting AGMs and EGMs; election of JMB/MC/SMC members; delays in filing of statutory forms, audited accounts and resolutions; and penalties in late filings.

Perhaps the Minister of Housing and Local Government (KPKT) has been advised by the Attorney-General’s Chambers to invoke her wide powers in Section 150 (Regulations) and Section 151 (Power to Exempt) to address the issues vis-à-vis ‘Special Circumstances’ including the Covid-19 pandemic. If that is the case, we urge the Minister to act expeditiously.

This article was written by Datuk Chang Kim Loong is Secretary-General of the National House Buyers Association (HBA), a non-governmental and not-for-profit organisation manned wholly by volunteers.

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