Covid-19 Bill will become meaningless after the twilight period

While Parliament in the Republic of Singapore has promptly passed an Act titled: Covid-19 (Temporary Measures) Act, 2020 (ACT) and was immediately assented to by the President and gazetted on April 9, 2020 and operational April 7, 2020, Malaysia is deferring the tabling of the bill to the 2nd Parliamentary sitting between July 27, 2020 to Sept 10, 2020.

In Malaysia, if there is going to be any Covid-19 Act, before such legislation can become law, there is going to be the tabling of the Covid-19 Bill at the Dewan Rakyat for first reading. It is at the second reading that the Covid-19 Bill is put through the process of debate and subsequently at the 3rd reading, if there are no objections, the Covid-19 Bill is passed to the Dewan Negara for its endorsement. The Yang Di-Pertuan Agong will then assent to the proposed legislation. By my analysis, this entire legislative process will take months and a Covid-19 Act will probably become law only in September, 2020, the earliest.

Effluxion of time

The damage afflicted by Covid-19 is evident to all; closure of businesses, shut down of government offices, loss of jobs, pay cuts, limited movements, rise in domestic violence, and deaths. While a Covid-19 Bill cannot cure the country of the Covid-19 virus, it is within the power of the government to expedite the passing of a Covid-19 law so as to intervene and shield parties to contracts who are victims of Covid-19 and the movement control order (MCO).

Early medical treatment is key to preventing deaths for those who have contracted the virus. Death renders medical treatment redundant for patients who seek treatment too late. It is the same with tabling a late Covid-19 Bill and the passing of a tardy Covid-19 Act.

It is impossible to turn back the hands of time and undo the carnage of the pandemic by passing a Covid-19 Bill any later than now! The effect of such a late Covid-19 Bill which is retrospective in nature will be simply too late. In most if not all contracts, there is always a stipulation that a party to a contract must perform their obligations within a certain time. In legal speak, time is of the essence and the failure to follow stipulated timelines will be considered an event of default giving rise to enforcement of rights or remedies by the other contracting party. The proposed Covid-19 Bill is intended to provide a ‘legal shield’ to parties who are unable to meet their obligations.

A late Covid-19 Bill cannot salvage events which have been already been set in motion from the start of the MCO because the affected parties would have ‘moved on’ owing to the effluxion of time. In other words, a late Covid-19 Act is redundant in nature. You cannot legislate back to life a business that has already closed down due to the failure of owners to sustain their business and pay rent during the MCO.

Under our proposed Covid-19 Act, safeguards to the respective parties can range from duration of relief, prohibition from penalisation due to breach of obligations under a contract or failure to perform and/or entitlement.

It ceases to matter who has the upper hand or is put to a disadvantage in any contract that has gone awry due to the MCO, whether it is present or post MCO. All victories are pyrrhic in nature meaning to say the victory will be at the expense of great losses to the victor. An example would be where the landlord forfeits a tenant’s security deposit owing to the tenant’s default in paying rental. In such a situation, the landlord is also not in the position of victory because he/she may have to expend further cost and expense to obtain vacant possession of the premises, dispose of the tenant’s equipment and fittings (if the tenant abandons the premises) and also scour the market for a suitable new tenant at the same rental rate, all of which represents continuous financial loss to the landlord who has also mortgaged the premises to a financial institution and needs to service their loan. Any relief that could have been given by a late Covid-19 Act would probably be ‘water under the bridge’ because those aggrieved contracting parties would have initiated legal proceedings earlier on to resolve their differences or seek judicial intervention or relief. Our Courts will be inundated with unnecessary litigation which could have been prevented by the quick action of our law makers but alas, it is not to be because of our lackadaisical attitude. The efforts, by all the trade organisations, NGOs and vested parties would be deemed irrelevant and in vain.

A tardy Covid-19 Act would also create confusion and uncertainty to contracts which have been determined or terminated prior to the Covid-19 Act. Is such termination considered valid and the remedies or forfeitures which have taken place be binding on the parties? 

Legal ramifications and domino effect

From a property perspective, the MCO will trigger a chain reaction akin to a domino effect across the entire supply chain with the purchasers claiming Liquidated Ascertained Damages (LAD) from the developers who in turn would attempt to recover their losses from the contractors, who (the latter) would then abandon the project when they could not pay. The developers would then be unable to pay the consultants, suppliers, creditors and even the bank loans and facilities, which will in turn create another chain of confrontational litigations.

Soon, the entire industry would be mired in a vicious cycle of litigations. A spike in the number of problematic projects, winding up of development companies, purchasers made bankrupt due to failure to service housing loans and eventually even the banks will experience the credit crunch. In the end, all parties lose out. Bearing in mind, there are also commercial construction projects at stake.

Let’s cast aside whatever personal interest, political aspirations and agendas to unite and legislate at top speed a Covid-19 Act to offer protection now so that many will have the opportunity to survive the effects of MCO and Covid-19. It is paramount that we restore confidence in our own citizens to continue investing in their own country through continuous economic activity and to restore investors’ confidence that Malaysia remains an attractive destination for investment. Everyone from the employee to business owners to Governments must be prepared to make sacrifices in order to have any hope of recovering from the devastation caused by Covid-19.

Datuk Chang Kim Loong is the Hon. Secretary-General of the National House Buyers Association (HBA).
HBA can be contacted at: Email: [email protected]
Website: www.hba.org.my
Tel: +6012 334 5676

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This story first appeared in the EdgeProp.my pullout on May 8, 2020. You can access back issues here.