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The Malaysian Covid-19 Bill and What’s in Store

Part 1/2: Is There Now a Saviour for a “Force Majeure-less” Contract?

The long-overdue Malaysian version Covid-19 bill, titled Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Bill 2020 (“the Bill”), was finally tabled for the first reading in Dewan Rakyat, the lower house of Parliament, on 12 August 2020. The Bill has come quite late in the day after contracting parties were faced with the predicament of now revisiting their force-majeure clauses (or the absence of the same).

However, do we see a true resolution to this predicament with the introduction of the Bill?

Here are certain key takeaways:

There is a Suspension of Enforcement Rights under a Contract

Part II of the Bill suspends the rights of contracting parties to enforce their rights against

any defaulting parties for their inability to perform any contractual obligations due to the

measures adopted under the Prevention and Control of Infectious Diseases Act 1988.

This suspension will take effect from 18 March 2020 to 31 December 2020 (unless extended by the Minister).

Which Contracts Would Benefit from this Suspension?

The Bill provides for seven scheduled categories of contracts:

  • 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;

  • Performance bond or equivalent that is granted pursuant to a construction contract or supply contract;

  • Professional services contract;

  • Lease of tenancy of non-residential property;

  • Event contract, such as for any business meeting, incentive travel, conference, exhibition, sales event, concert, show, wedding, party or other social gathering or a sporting event;

  • Contract by a tourism enterprise and a contract for the promotion of tourism in Malaysia; and

  • Religious pilgrimage-related contract.

What About Contracts Which Have Been Terminated / Enforced Before the Bill?

The unfortunate news to defaulting parties to a contract is that the Bill provides that any

contract terminated, any deposit forfeited, any damages received, any legal proceedings

commenced, any judgment or award granted, and any execution carried out since

18 March 2020 shall be deemed valid.

What If Parties are in Dispute on Action Taken on a Contract During the Prescribed Period?

The Bill provides for an avenue for parties to consider a mediation of such disputes

where the Minister may determine the mediation process. With the use of the word “may”

in allowing recourse to mediation, this is an insinuation that the mediation process is a

voluntary one between the parties.

So… Is There a True Saviour to a Force Majeure-less Contract?

It may be the case that the measures implemented under the Bill may arrive too late once the same comes into force whereby parties who intend to circumvent the moratorium imposed by the Bill will opt to terminate and / or enforce their agreements at this stage prior to the coming into force of the Bill. The effectiveness of the Bill remains to be seen when it comes into force presumably earliest in September 2020 after it is passed by Dewan Negara.

Part 2/2: Introducing COVID Amendments to Legislation – A Snapshot of What You Need to Know

There are a variety of legislation which will see modification, the most important being the following:

The Limitation Period is Extended

The limitation period under the different laws which prescribe for the same which expires

during the period from 18 March 2020 to 31 August 2020 is extended to 31 December 2020. The Limitation Act 1953, Sabah Limitation Ordinance, Sarawak Limitation Ordinance and the Public Authorities Protection Act 1948 will now see modification to implement these changes.

The Threshold for Indebtedness to Trigger Bankruptcy Has Been Increased

In what may seem like an answer to the plight of individual debtors, the Bill has introduced the increase of the threshold in the Insolvency Act 1967 to present a bankruptcy petition on an individual from RM50,000 to RM100,000 and this shall remain the threshold until 31 August 2021. However, any actions or proceedings taken out immediately before the coming into force of the Bill will not be affected by this new change in threshold.

The Chief Justice is Empowered to Issue Directions and Modify the Rules of Court

Where previously any change in the Rules of Court would ordinarily be approved by the Rules Committee, these changes have now been introduced to empower the Chief Justice to issue any direction relating to the business of the Court, modify any provision of the Rules of Court or suspend the application of such rules in the interest of justice, public safety, public security, public health or propriety. With these changes, it is left to be seen if the same may pave the path for quicker modifications to the Rules of Court to cater for remote / video hearings in light of the pandemic.

The Latitude of Time under Housing Development Laws

Modifications will now be introduced to the Housing Development (Control and Licensing) Act 1966. Late payment charges cannot be imposed for the purchasers’ failure to pay installments within the period from 18 March 2020 to 31 August 2020 and this same period is excluded from the calculation of the time for delivery of vacant possession, the liquidated damages for failure to deliver vacant possession, the defect liability period, and the time for the repair works by the developers. The Minister is empowered to extend the above mentioned period until 31 December 2020 upon application by the purchaser or developer. However, as with the Insolvency Act 1967, these changes will not affect legal proceedings already commenced, any judgment or award obtained relating to the recovery of late payment charges by purchaser or liquidated damages payable by the developer or any other sum from 18 March 2020.

The Bill has been generally criticised as coming too late and failing to provide sufficient

protection to the groups most affected by the Movement Control Order(s). The effectiveness of the Bill remains to be seen when it comes into force presumably earliest in September 2020, after it is passed by Dewan Negara.

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