Court of Appeal passed up opportunity to make landmark decision

In a usual housing project, a purchaser buys a house from the developer, then takes a loan to finance the purchase. The bank pays the developer periodic payments based on architect's certificate. Problem is, sometimes the architect's certificate may not be reflective of actual development on site. Of course, the architect owes a duty of care as a professional, but money would have been released to the developer already by then.

In Cheah Swee Fah v BBMB, the purchaser sued by the bank argued that the bank has paid improperly as the architect's certificate was not reflective of the status of development on site. The Court of Appeal held (correctly) that the bank ought to continue releasing the payments because the bank is neither obligated nor capable of ascertaining actual status of development on site.

Whilst there is nothing technically wrong with such a ruling, this ruling has failed to consider the reality that many times, when projects are abandoned, purchasers actually know about the abandonment and do write in to the banks to request for there to be no further payments authorised. Under such circumstances, how can the bank feign ignorance of the development on-site?

The grim reality is that banks who receive such letters from purchasers nevertheless would advise them that they are obligated to continue releasing payment to the delinquent developer. It seems that the banks are more concerned about their liability based on documents, rather than on actual liability in the event a disgruntled purchaser decides to sue the bank for its refusal to honour the communication made.

In this, like many other circumstances, the man in the street falls afoul on the wrong side of the law. Revolutions start when justice through law (the motto of the Bar Council) fail to achieve justice in fact. The superior courts would do well to seek to administer justice beyond the written word alone.

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I write because I have not given up on courts of law to administer justice, even this side of Eternity. E-mail me at khenghoe@mycounsel.com.my.