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COVID-19 ACT – Summary of 5 Key Reliefs

INTRODUCTION

The Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (COVID-19) Act 2020 (Act 829) (“Covid-19 Act”) is finally published in the Federal Gazette on 23 October 2020. The Covid-19 Act is deemed to have come into operation on 18 March 2020 and shall continue to remain in operation until 31 December 2020.

5 KEY RELIEFS UNDER THE COVID-19 ACT

  1. Suspension of Performance of Contractual Obligations
  2. Modifications to the Housing Development (Control and Licensing) Act 1966
  3. Modifications to the Limitation Act 1953 
  4. Modifications to the Insolvency Act 1967 
  5. Modifications to the Courts of Judicature Act 1964 and Subordinate Courts Act 1948 

1. SUSPENSION OF PERFORMANCE OF CONTRACTUAL OBLIGATIONS

The first notable relief provided under the Covid-19 Act is allowing a respite for contracting parties who could not perform their contractual obligations from 18 March 2020 onwards. 

Section 7 of the Covid-19 Act provides as follows:-

Inability to perform contractual obligation

“7.  The inability of any party or parties to perform any contractual obligation arising from any of the categories of contracts specified in the Schedule to this Part due to the measures prescribed, made or taken under the Prevention and Control of Infectious Diseases Act 1988 [Act 342] to control or prevent the spread of COVID-19 shall not give rise to the other party or parties exercising his or their rights under the contract.”

The categories of contracts applicable as listed under the Schedule [Section 7] are as follows: -

  1. construction work contract or construction consultancy contract and any other contract related to the supply of construction material, equipment or workers in connection with a construction contract;
  2. performance bond or equivalent that is granted pursuant to a construction contract or supply contract;
  3. professional services contract;
  4. lease or tenancy of non-residential immovable property;
  5. event contract for the provision of any venue, accommodation, amenity, transport, entertainment, catering or other goods or services including for any business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering or sporting event, for the participants, attendees, guests, patrons or spectators of such gathering or event;
  6. contract by a tourism enterprise as defined under the Tourism Industry Act 1992 [Act 482] and a contract for the promotion of tourism in Malaysia; and
  7. religious pilgrimage-related contract.

Section 9 of the Covid-19 Act further provides an avenue for parties to settle any dispute in respect of any inability of any party or parties to perform their contractual obligations arising from any of the categories of contracts specified in the Schedule above by way of mediation. This appears to be a voluntary process and parties are not compelled to mediate. The mediation process however, remains unclear as the Minister is given wide powers to determine the mediation process which includes the appointment of a mediator, role of a mediator, conduct of mediation and conclusion of mediation. 

Q: What happens to contracts terminated from 18 March 2020 until the publication of the Covid-19 Act?

Such contracts are deemed to have been validly terminated as provided under the saving provision of Section 10 of the Act:- 

“10.  Notwithstanding section 7, 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 from 18 March 2020 until the date of publication of this Act shall be deemed to have been validly terminated, forfeited, received, commenced, granted or carried out.”

It is clear that the saving provision is intended to preserve the validity of any contracts terminated as well as to not disturb the legal actions including any judgment or execution thereof carried out between the period of 18 March 2020 until the publication of Covid-19 Act. 

However, it is pertinent to note that as many legal actions would have been taken prior to the publication of this Covid-19 Act, the intended relief provided under Section 7 appears to have become academic for many affected parties.
 


2.  MODIFICATIONS TO THE HOUSING DEVELOPMENT (CONTROL AND LICENSING) ACT 1966

The second important relief provided under the Covid-19 Act is the modification made to the housing development laws in respect of the agreements in the forms prescribed in Schedules G, H, I and J of the Housing Development (Control and Licensing) Act 1966 (“HDA 1966”) entered into before 18 March 2020. 

 

Late payment charges

Firstly, pursuant to Section 34 of the Covid-19 Act, no late payment charges shall be imposed by the developer in respect of such unpaid installment on the purchaser if the purchaser fails to pay any installment for the period from 18 March 2020 to 31 August 2020

If extension of time is required to pay the installment after 31 August 2020, the Purchaser may apply to the Minister for the extension of such period subject to the Minister’s consideration and satisfaction if such additional time is required. The Minister is only allowed to extend the period up to 31 December 2020. 

Delivery of vacant possession and liquidated damages

Secondly, Section 35 of the Covid-19 Act excludes the calculation of the time for delivery of vacant possession (“VP”) of a housing accommodation and the liquidated damages for the failure of the developer to deliver VP of a housing accommodation for any agreement entered into between the purchaser and the developer during the period from 18 March 2020 to 31 August 2020

Similarly, if extension of time is required, the Developer may apply to the Minister for an extension of such period and the Minister may only extend such period up to 31 December 2020.

It is further provided that in the event the Purchaser is unable to enter into possession or occupation of a housing accommodation from the date of service of a notice to take VP from the developer during the period from 18 March 2020 to 31 August 2020 or any extension granted thereof, the purchaser shall not be deemed to have taken such VP

 

Defect liability period 

Thirdly, Section 36 of the Covid-19 Act also excludes the calculation of the defect liability period after the date the purchaser takes VP of a housing accommodation and the time for the developer to carry out works to repair and make good of any such defects for any agreement entered into between the period from 18 March 2020 to 31 August 2020. If extension of time is required, the purchaser may apply to the Minister for an extension of the said period and the Minister may extend such period up to 31 December 2020.

As the Covid-19 Act is only published in the gazette recently, it appears that the reliefs provided under Sections 34, 35 and 36 above are no longer automatic after 31 August 2020. The affected parties will need to apply to the Minister for extension of time. How it is done and how long it would take for the Minister to consider such application is still unclear.  Further, the definition of “Minister” referred to in this Part of the Act is also not defined. 

It is pertinent to note that by virtue of the saving provision under Section 37 of the Act, the above modifications in Sections 34, 35 and 36 shall not affect any legal proceedings commenced or reliefs obtained by the affected parties during the period from 18 March 2020 until the date of the publication of this Act. Any late payment charges that has been paid by the purchaser or liquidated damages that has been paid by the developer before the date of publication of this Act shall be deemed to have been validly paid under the HDA 1966.

 

Modification to section 16N of the HDA 1966 – Limitation period for homeowners to file claim

Fourthly, it is provided under Section 38 of the Covid-19 Act that if the limitation period for the homebuyer to file a claim has expired during the period from 18 March 2020 to 9 June 2020, the homebuyer is entitled to file the claim from 4 May 2020 to 31 December 2020 and the Tribunal for Homebuyer Claims shall have jurisdiction to hear such claims. 
 


3.  MODIFICAITONS TO THE LIMITATION ACT 1953 

Another important relief that the Covid-19 Act provides is the extension of the limitation period which expired during the period from 18 March 2020 to 31 August 2020.

“12.  Any limitation period specified in section 6 of the Limitation Act 1953 which expires during the period from 18 March 2020 to 31 August 2020 shall be extended to 31 December 2020.”

Section 6 of the Limitation Act 1953 provides for a 6-year limitation period for actions of contract and tort. This is to encourage the litigants to act diligently and bring lawsuits in a timely fashion.

However, the unprecedented nature of the Covid-19 global pandemic has forced many sectors to implement extraordinary measures to facilitate social distancing, leading to the difficulties faced by many litigants in filing their claims at the courts within the expiring limitation period. 

Therefore, the modification under Section 12 of the Act is very much welcomed as an attempt to obviate such difficulties by postponing the 6-year limitation period for parties who intend to bring actions of contract and tort which became time-barred during the period from 18 March 2020 to 31 August 2020.
 


4. MODIFICATIONS TO THE INSOLVENCY ACT 1967 

It is worthwhile to note that the Covid-19 Act also deals with the minimum threshold in which a creditor can seek to present a bankruptcy petition against the debtor.

Pursuant to the Insolvency Act 1967, the threshold amount which an individual must owe to a creditor before a bankruptcy petition can be filed is RM50,000. By virtue of Sections 19 and 20 of the Covid-19 Act, this threshold is now increased to RM100,000 until 31 August 2021 and the Minister has the discretion to extend this period.

This modification to the minimum threshold is in fact consistent with Section 2(a) of the Insolvency (Amendment) Act 2020 which was gazetted on 22 October 2020. However, it is important to take note of one difference between both the Acts. In contrast to the modification under the Covid-19 Act which only has a temporary effect, the increment of the threshold under the Insolvency (Amendment) Act 2020 is not bound by any timeframe and the threshold is subject to further amendment for a specific time period at the discretion of the Minister.

Q: Does this modification apply to bankruptcy proceedings or actions which are still pending immediately before the publication of the Covid-19 Act?

Such proceedings that were commenced prior to the date of the publication of the Covid-19 Act will not be subject to the said modification, as provided under the saving provision of Section 21 of the Covid-19 Act:- 

 “21.  Any proceedings, actions or other matters required to be done under the Insolvency Act 1967 which are still pending immediately before the date of publication of this Act shall be dealt with under the Insolvency Act 1967 as if the Insolvency Act 1967 had not been modified by this Act.”

The modification to the minimum threshold for the presentation of bankruptcy petition is expected to provide an interim relief and protection to individuals who are currently struggling financially amid the Covid-19 outbreak. Nonetheless, it appears that such relief has arrived too late as many creditors with debts of less than RM100,000 might have already commenced the bankruptcy proceedings prior to the coming into force of the Covid-19 Act. 
 


5. MODIFICATIONS TO THE COURTS OF JUDICATURE ACT 1964 AND SUBORDINATE COURTS ACT 1948 

The Covid-19 Act also brought out new provisions to the Courts of Judicature Act 1964 which allow the Chief Justice to issue any directions relating to the business of the Court as may be necessary, if the Chief Justice is of the opinion that the circumstances warrant and it is necessary in the interest of the dispensation of justice, public safety, public security, public health and other sufficient reason. Moreover, the Chief Justice also have the power to modify any provision of the rules of court or suspend the application of such rules of court as is necessary to ensure that the administration of justice is carried out.

In addition, the abovesaid new powers of the Chief Justice are also implemented in the Subordinate Courts Act 1948 and Subordinate Courts Rules Act 1955.

These new powers would no doubt enable the Chief Justice make changes and modifications to Court proceedings in an expeditious manner without having to go through the lengthy process of getting the approval of the Rules of Committee.
 


Comments

The Covid-19 pandemic is generating high uncertainty affecting every integrated part of our society. Whilst the Prevention and Control of Infectious Diseases Act 1988 provides the Government with capacious and wide-ranging of powers to carry out measures in combating the Covid-19 disease and to safeguard the health of our fellow Malaysians, the pervasive social, economic and administrative disruptions caused by the pandemic are left out in the cold. 

After several months of legislative effort, the Covid-19 Act has eventually been promulgated, in a bid to provide temporary measures to alleviate the impact of the Covid-19 pandemic. To do so, the Covid-19 Act modifies the provisions in the several statutes inter alia the Limitation Act 1953, the Insolvency Act 1967, the Housing Development (Control and Licensing) Act 1966, the Courts of Judicature Act 1964, the Subordinate Courts Act 1948 and the Subordinate Courts Rules Act 1955. 

Premised on the above discussion, the Covid-19 Act is believed to benefit individuals and companies that are financially and economically affected by the Covid-19 pandemic. At large, the temporary reliefs set forth in the Covid-19 Act will go a long way to keep the commercial market going as well as to allow our country to recover from a pandemic-led economic crisis. Over and above, governmental bodies including the courts are thereby authorised to make necessary administrative adjustments or extension of time, as and when required, vis-à-vis the performance of their statutory obligations if parties are affected by the Government’s measures in combating the global pandemic.

Be that as it may, the effectiveness of the Covid-19 Act in easing the impact of the pandemic is yet to be seen, given that the real impact of the pandemic on our country is highly unpredictable. With the proliferation of Covid-19 cases, the relevant stakeholders including the Government shall monitor the situation closely and perform periodic review to ensure that the Covid-19 Act remains relevant and serves its purpose.

In the event that any provisions in the Covid-19 Act is found to be no longer relevant or effective, the relevant stakeholders shall work in tandem to amend or revise the Covid-19 Act timely to serve the material needs of the affected parties. 

For more information about the Covid-19 Act and other Covid-19 reliefs currently implemented in Malaysia, please do not hesitate to get in touch.

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Disclaimer: This article is not intended to act as, or substitute legal advice. If you have specific queries or require legal advice, please feel free to contact us. 

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Suite 29-01, Premier Suites
Menara 1MK
Kompleks 1 Mont Kiara
1, Jalan Kiara
50480 Kuala Lumpur 
Malaysia

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