In a dispute arising from leasehold residential transactions within a government-backed economic development initiative, the Court of Appeal in AP Tropika Istimewa Development Sdn Bhd v Wong Hang Fah & 106 Others, Civil Appeal No. W-02(NCvC)(W)-1552-10/2020 affirmed the legal validity of a private lease scheme implemented pursuant to ministerial exemption and regional planning guidelines. The decision clarifies key issues regarding the retrospective effect of judicial pronouncements, enforceability of statutory exemptions, and the appropriate legal avenue for challenging administrative acts. The Court’s judgment carries significant implications for developers, purchasers, and regulators operating within Special Economic Zones (“SEZs”) and under alternative land tenure arrangements.
Background Facts
The Meridin @ Medini project located in Medini Iskandar Malaysia, a designated Special Economic Zone (“SEZ”) in Iskandar Puteri, Johor.
The Special Economic Zone and Lease Structure
Medini Iskandar Malaysia is a designated SEZ under both federal and state legislation. The land on which the project was developed is freehold land owned by Iskandar Investment Berhad (“IIB”), which granted a 99-year lease (commencing on 15 April 2013 and expiring on 14 April 2112) to Medini Land Sdn Bhd. Pursuant to the development framework approved by the Iskandar Regional Development Authority (“IRDA”) and the Ministry of Housing and Local Government (“KPKT”), the project was to be conducted under a private lease scheme.
The Parties and the Agreements
The appellant, Tropika Istimewa Development Sdn Bhd (“Developer”), a subsidiary of Mah Sing Group Berhad, developed The Meridin @ Medini project in Iskandar Puteri, Johor. The Developer entered into sale and purchase agreements (“SPAs”) with 107 individual purchasers (“Purchasers”), each granting a 99-year leasehold interest in a residential strata parcel. The SPAs were executed under an exemption granted by the Ministry of Housing and Local Government (“KPKT”) pursuant to Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 (“HDR”), which permitted deviation from the mandatory Schedule H SPA format and extended the delivery period from 36 to 48 months. Both the KPKT exemption and IRDA’s Private Lease Scheme guidelines were disclosed to the purchasers prior to their execution of the SPAs. The Developer also executed supplemental agreements for the sale of car park lots.
Civil Proceedings Commenced by the Purchasers
Despite taking vacant possession and receiving individual strata titles in 2017, the Purchasers later commenced civil proceedings against the Developer in the Johor Bahru High Court. The Purchasers alleged that:
The SPAs breached the Housing Development (Control and Licensing) Act 1966 (“HDA”), the HDR, the National Land Code 1965 (“NLC”), and the Strata Titles Act 1985 (“STA”);
The Developer had misrepresented the legal nature of their interest in the property; and
They were entitled to liquidated ascertained damages (“LAD”) for alleged late delivery of vacant possession.
High Court Decision
The High Court ruled in favour of the Purchasers. Relying on Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor [2020] 1 MLJ 281; [2019] 6 MLRA 494, the High Court found that the Controller of Housing had exceeded his powers in granting the exemption. The SPAs were deemed in breach of the HDA and HDR. LAD and damages were awarded to selected Purchasers, and declarations were granted invalidating the SPAs and requiring compliance with Schedule H.
Key Legal Framework
The Court of Appeal addressed the scope of Regulation 11(3) of the HDR, which empowers the Minister to exempt developers from compliance with specified provisions of the Regulations. Sections 218–221 and 227 of the NLC were also considered, as they regulate the grant and registration of leasehold interests in land. The Court also examined the statutory development regime under the IRDA Act 2007, which governs SEZ planning approvals in Medini.
A key authority considered was Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd & Other Appeals [2024] 5 MLJ 879; [2024] 6 MLRA 1, in which the Federal Court adopted the “second actor” principle. This doctrine shields private parties from legal liability when they act in good faith based on an administrative decision later declared invalid, provided there is no bad faith or impropriety.
The Court also referred to Ahmad Jefri Mohd Jahri v Pengarah Kebudayaan dan Kesenian Johor & Ors [2010] 3 MLJ 145 and Pan Wai Mei v Lim Guan Eng & Ors [2019] MLJU 2216, both of which affirmed that a party aggrieved by an administrative decision must pursue judicial review and cannot mount a collateral challenge in civil proceedings.
Legal Arguments and Analysis
The Developer argued that it had relied in good faith on the KPKT’s written approval and IRDA’s guidelines in entering into the SPAs. It submitted that any challenge to the exemption should have been mounted by way of judicial review, which the Purchasers had failed to do. The Developer further contended that the Federal Court decision in Ang Ming Lee should apply prospectively, not retrospectively.
The Court of Appeal agreed. It found that the Defendant was a “second actor” who relied on validly issued exemptions and planning guidelines, and the Purchasers had full knowledge of these facts prior to executing the SPAs. The Court relied on Prema Bonanza, which affirmed that retrospective application of Ang Ming Lee would cause “substantial injustice” to developers who had complied with the law as it then stood. The Court further held that the Purchasers’ failure to challenge the KPKT’s decision through judicial review rendered their collateral challenge in civil proceedings impermissible, consistent with Ahmad Jefri and Pan Wai Mei.
The Court also rejected the misrepresentation claim. It found that the Purchasers were aware of the lease structure, which had been clearly stated in the SPA and financing documents. Several Purchasers admitted under cross-examination that their intention to challenge the lease arrangement only arose after the Ang Ming Lee decision. The Court held that the Purchasers had benefited from exemptions applicable to Medini, including relaxed foreign ownership rules, and were estopped from denying the validity of the lease arrangement.
On the issue of LAD, the Court found that the Developer had delivered vacant possession within the 48-month period lawfully permitted under the SPA and approved by the authorities. There was therefore no breach of contract. The Court also dismissed the cross-appeal concerning the quantum and timing of LAD calculations, holding that the issue had become academic given its primary findings.
Outcome and Practical Implications
The Court of Appeal unanimously allowed the Developer’s appeal and dismissed the Purchasers’ cross-appeal. The decision reinstates the enforceability of SPAs executed under regulatory exemptions and confirms that Ang Ming Lee does not apply retrospectively to invalidate transactions completed under prior legal authority. It reaffirms that administrative decisions must be challenged via judicial review and that purchasers who fail to take such steps cannot later mount collateral attacks in civil court.
Importantly, the judgment also confirms that the issuance of strata titles under a long-term lease is valid and does not contravene the NLC or STA. The Court found no basis for the Purchasers’ assertions that they were misled or deprived of ownership rights, noting that the property regime in Medini was expressly designed to operate under a private lease model.
Conclusion
The Court of Appeal’s decision in AP Tropika Istimewa Development Sdn Bhd v Wong Hang Fah & 106 Others, Civil Appeal No. W-02(NCvC)(W)-1552-10/2020 provides authoritative guidance on the limits of retrospective judicial rulings, the proper channel for challenging administrative decisions, and the sanctity of reliance on regulatory frameworks. It reaffirms the legal position that SPAs executed in accordance with formal ministerial exemptions and approved SEZ planning guidelines are valid, even if the enabling exemptions are later declared ultra vires. The judgment brings much-needed certainty to the property industry, particularly in regulated development zones such as Medini, and serves as a key precedent for future disputes involving hybrid land tenure models.
Court of Appeal Affirms Validity of Private Lease Schemes in Medini Iskandar SEZ
In a dispute arising from leasehold residential transactions within a government-backed economic development initiative, the Court of Appeal in AP Tropika Istimewa Development Sdn Bhd v Wong Hang Fah & 106 Others, Civil Appeal No. W-02(NCvC)(W)-1552-10/2020 affirmed the legal validity of a private lease scheme implemented pursuant to ministerial exemption and regional planning guidelines. The decision clarifies key issues regarding the retrospective effect of judicial pronouncements, enforceability of statutory exemptions, and the appropriate legal avenue for challenging administrative acts. The Court’s judgment carries significant implications for developers, purchasers, and regulators operating within Special Economic Zones (“SEZs”) and under alternative land tenure arrangements.
Background Facts
The Meridin @ Medini project located in Medini Iskandar Malaysia, a designated Special Economic Zone (“SEZ”) in Iskandar Puteri, Johor.
The Special Economic Zone and Lease Structure
Medini Iskandar Malaysia is a designated SEZ under both federal and state legislation. The land on which the project was developed is freehold land owned by Iskandar Investment Berhad (“IIB”), which granted a 99-year lease (commencing on 15 April 2013 and expiring on 14 April 2112) to Medini Land Sdn Bhd. Pursuant to the development framework approved by the Iskandar Regional Development Authority (“IRDA”) and the Ministry of Housing and Local Government (“KPKT”), the project was to be conducted under a private lease scheme.
The Parties and the Agreements
The appellant, Tropika Istimewa Development Sdn Bhd (“Developer”), a subsidiary of Mah Sing Group Berhad, developed The Meridin @ Medini project in Iskandar Puteri, Johor. The Developer entered into sale and purchase agreements (“SPAs”) with 107 individual purchasers (“Purchasers”), each granting a 99-year leasehold interest in a residential strata parcel. The SPAs were executed under an exemption granted by the Ministry of Housing and Local Government (“KPKT”) pursuant to Regulation 11(3) of the Housing Development (Control and Licensing) Regulations 1989 (“HDR”), which permitted deviation from the mandatory Schedule H SPA format and extended the delivery period from 36 to 48 months. Both the KPKT exemption and IRDA’s Private Lease Scheme guidelines were disclosed to the purchasers prior to their execution of the SPAs. The Developer also executed supplemental agreements for the sale of car park lots.
Civil Proceedings Commenced by the Purchasers
Despite taking vacant possession and receiving individual strata titles in 2017, the Purchasers later commenced civil proceedings against the Developer in the Johor Bahru High Court. The Purchasers alleged that:
High Court Decision
The High Court ruled in favour of the Purchasers. Relying on Ang Ming Lee & Ors v Menteri Kesejahteraan Bandar, Perumahan dan Kerajaan Tempatan & Anor [2020] 1 MLJ 281; [2019] 6 MLRA 494, the High Court found that the Controller of Housing had exceeded his powers in granting the exemption. The SPAs were deemed in breach of the HDA and HDR. LAD and damages were awarded to selected Purchasers, and declarations were granted invalidating the SPAs and requiring compliance with Schedule H.
Key Legal Framework
The Court of Appeal addressed the scope of Regulation 11(3) of the HDR, which empowers the Minister to exempt developers from compliance with specified provisions of the Regulations. Sections 218–221 and 227 of the NLC were also considered, as they regulate the grant and registration of leasehold interests in land. The Court also examined the statutory development regime under the IRDA Act 2007, which governs SEZ planning approvals in Medini.
A key authority considered was Obata-Ambak Holdings Sdn Bhd v Prema Bonanza Sdn Bhd & Other Appeals [2024] 5 MLJ 879; [2024] 6 MLRA 1, in which the Federal Court adopted the “second actor” principle. This doctrine shields private parties from legal liability when they act in good faith based on an administrative decision later declared invalid, provided there is no bad faith or impropriety.
The Court also referred to Ahmad Jefri Mohd Jahri v Pengarah Kebudayaan dan Kesenian Johor & Ors [2010] 3 MLJ 145 and Pan Wai Mei v Lim Guan Eng & Ors [2019] MLJU 2216, both of which affirmed that a party aggrieved by an administrative decision must pursue judicial review and cannot mount a collateral challenge in civil proceedings.
Legal Arguments and Analysis
The Developer argued that it had relied in good faith on the KPKT’s written approval and IRDA’s guidelines in entering into the SPAs. It submitted that any challenge to the exemption should have been mounted by way of judicial review, which the Purchasers had failed to do. The Developer further contended that the Federal Court decision in Ang Ming Lee should apply prospectively, not retrospectively.
The Court of Appeal agreed. It found that the Defendant was a “second actor” who relied on validly issued exemptions and planning guidelines, and the Purchasers had full knowledge of these facts prior to executing the SPAs. The Court relied on Prema Bonanza, which affirmed that retrospective application of Ang Ming Lee would cause “substantial injustice” to developers who had complied with the law as it then stood. The Court further held that the Purchasers’ failure to challenge the KPKT’s decision through judicial review rendered their collateral challenge in civil proceedings impermissible, consistent with Ahmad Jefri and Pan Wai Mei.
The Court also rejected the misrepresentation claim. It found that the Purchasers were aware of the lease structure, which had been clearly stated in the SPA and financing documents. Several Purchasers admitted under cross-examination that their intention to challenge the lease arrangement only arose after the Ang Ming Lee decision. The Court held that the Purchasers had benefited from exemptions applicable to Medini, including relaxed foreign ownership rules, and were estopped from denying the validity of the lease arrangement.
On the issue of LAD, the Court found that the Developer had delivered vacant possession within the 48-month period lawfully permitted under the SPA and approved by the authorities. There was therefore no breach of contract. The Court also dismissed the cross-appeal concerning the quantum and timing of LAD calculations, holding that the issue had become academic given its primary findings.
Outcome and Practical Implications
The Court of Appeal unanimously allowed the Developer’s appeal and dismissed the Purchasers’ cross-appeal. The decision reinstates the enforceability of SPAs executed under regulatory exemptions and confirms that Ang Ming Lee does not apply retrospectively to invalidate transactions completed under prior legal authority. It reaffirms that administrative decisions must be challenged via judicial review and that purchasers who fail to take such steps cannot later mount collateral attacks in civil court.
Importantly, the judgment also confirms that the issuance of strata titles under a long-term lease is valid and does not contravene the NLC or STA. The Court found no basis for the Purchasers’ assertions that they were misled or deprived of ownership rights, noting that the property regime in Medini was expressly designed to operate under a private lease model.
Conclusion
The Court of Appeal’s decision in AP Tropika Istimewa Development Sdn Bhd v Wong Hang Fah & 106 Others, Civil Appeal No. W-02(NCvC)(W)-1552-10/2020 provides authoritative guidance on the limits of retrospective judicial rulings, the proper channel for challenging administrative decisions, and the sanctity of reliance on regulatory frameworks. It reaffirms the legal position that SPAs executed in accordance with formal ministerial exemptions and approved SEZ planning guidelines are valid, even if the enabling exemptions are later declared ultra vires. The judgment brings much-needed certainty to the property industry, particularly in regulated development zones such as Medini, and serves as a key precedent for future disputes involving hybrid land tenure models.
About the authors
Lim Ting Mei
Associate
Real Estate
Halim Hong & Quek
[email protected]
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