SEZ private lease scheme valid, says appellate court in landmark judgment on developer’s appeal

• On April 29, the appellate court allowed Tropika Istimewa Development Sdn Bhd, the developer of The Meridin@Medini project in Medini Iskandar Malaysia’s appeal against 107 property buyers for liquidated ascertained damages (LAD).

PUTRAJAYA (May 22): In a landmark decision, the Court of Appeal (COA) last month ruled that a private lease scheme involving the Special Economic Zone (SEZ)—as sanctioned by the local authority at Iskandar Malaysia in Johor—is valid.

On April 29, the appellate court allowed Tropika Istimewa Development Sdn Bhd, the developer of The Meridin@Medini project in Medini Iskandar Malaysia’s appeal against 107 property buyers for liquidated ascertained damages (LAD).

Tropika Istimewa, a subsidiary of Mah Sing Group Bhd (KL:MAHSING), managed to reverse the Johor Bahru High Court’s decision that ordered the developer to pay LAD to the purchasers. The Court of Appeal also dismissed the purchasers’ cross-appeal over the quantum awarded to them by the High Court.

The COA unanimously found that the High Court had erred in deciding the award. This is because the vacant possession to the property in question were delivered to the purchasers within the duly extended period in 2017, following the extension granted by the Housing and Local Government Ministry, were deemed valid, and the purchasers had also had received their strata title.

The COA bench, led by Datuk P Ravinthran and consisting of appellate judges Datuk Mohd Nazlan Mohd Ghazali and Datuk Ahmad Kamal Md Shahid, made the decision in April, and the written grounds were released on Thursday.

The group of 107 purchasers had earlier succeeded in the High Court in arguing that the sale and purchase agreements (SPAs) breached the Housing Development (Control and Licensing) Act 1966 (HDA), the Housing Development (Control and Licensing) Regulations 1989 (HDR), National Land Code 1965 (NLC), and Strata Titles Act 1985 (STA).

The High Court had relied on the landmark Ang Ming Lee decision by the Federal Court in 2020 to invalidate the purchasers’ SPAs and ordered the developer to comply with Schedule H of the SPA to pay damages for misrepresentation and breach of contract, as well as pay the LAD.                        

Private lease scheme affirmed

Ahmad Kamal, who wrote the unanimous decision, had decisively affirmed the private lease scheme and upheld the reliability of the ministry’s regulatory powers.

“We [the bench] are of the considered view that the aftermath of the Ang Ming Lee case has not jeopardised the defendant [developers] rights, whom had relied on the ministry’s approval, but also the guidelines provided for by the Iskandar Regional Development Authority [IRDA] that governs Medini Iskandar Development.

“It also affected the rights of the other developer and the whole development. Every developer intending to develop a project in Medini Iskandar, including the defendant [Tropika Istimewa], was mandated to adhere to the scheme as established in IRDA’s guidelines,” Ahmad Kamal said.

The Medini Iskandar project is situated on freehold land owned by a private corporation known as Iskandar Investment Bhd (IIB). IIB has granted a lease to Medini Land Sdn Bhd for a period of 99 years from 2013 that was supposed to expire on April 14, 2112.

The Johor land office and IRDA have established guidelines to properties in Medini Iskandar to regulate sale and purchase transactions for the projects in Iskandar Malaysia.

According to Datuk Lim Chee Wee, who acted for Tropika Istimewa, this landmark decision by the appellate bench has significant implications for property development in the SEZ.

“The decision restores certainty to the regulatory landscape governing developments within the SEZ like Medini, and underscores the importance of adhering to prescribed statutory remedies when challenging administrative decisions,” said Lim, who appeared with Marcus Tan and Eunice Kwong of Messrs Ricky Tan & Co.

The purchasers were represented by Datuk KL Wong and Wong Ren Xin.

Besides affirming the private lease scheme, the appellate bench also ruled that Tropika Istimewa had acted lawfully in relying on regulatory approvals granted by the ministry, and in accordance with applicable guidelines, the validity of the SPA and strata titles issued.

In addition, the COA also underscore that challenges to the exercises of statutory powers must be pursued via judicial review proceedings by naming the local authority in the action, which the purchasers had failed to do, and there was no misrepresentation done by the developer.

Medini Iskandar spans 2,230 acres in Iskandar Puteri, and carries an estimated gross development value (GDV) of US$20 billion (RM81.6 billion). Besides Medini Iskandar, other developers such as Farlim Group (Malaysia) Bhd—the developer of the 356-acre Bandar Baru Ayer Itam in Penang—have also implemented variants of the private land scheme.

Want to have a more personalised and easier house hunting experience? Get the EdgeProp Malaysia App now.