Temporary Measures for Reducing the Impact of Coronavirus Disease 2019 (Covid-19) Act 2020
(A Summary – Part I)
On 16.10.2020, the Malaysian "Covid-19 Act" received Royal Assent and became law. This new Act was an effort by the Malaysian government to put in place temporary measures to reduce the overreaching impact of the Covid-19 pandemic. This write-up attempts to provide a summary of such measures as well as to highlight the key areas involved.
Note: As of the date of this publication, the "Covid-19" Act will continue to be in force until 31.3.2021.
Inability to Perform Contractual Obligation
At the offset, Section 7 the "Covid-19 Act" states that, the inability of any party to perform any contractual obligation arising from any of the categories of contracts specified in the Schedule (to the Act) due to measures prescribed, made or taken under the Prevention and 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 list of contracts are:-
- 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 or tenancy of non-residential immovable property.
- 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, or sporting event, for the participants, attendees, guests, patrons or spectators of such gathering event.
- Contract by tourism enterprise as defined under the Tourism Industry Act 1992 and a contract for the promotion of tourism in Malaysia.
- Religious pilgrimage-related contract
Though it must be noted, notwithstanding the provisions of Section 7 above, any contract terminated, any deposit or performance bond forfeited, any damages received (judgemental or award granted), and any execution carried out for the period from 18.3.2020 until the date of publication of this Act (23.10.2020) shall be deemed to have been validly terminated, forfeited, received, commenced, granted or carried out.
Section 9 of the "Covid-19 Act" then prescribes that any inability of any party to perform any contractual obligation arising from any of the categories of contracts specified in the Schedule above, may be settled by way of mediation. For purposes of such mediation:-
- The Minister may determine the mediation process which includes the appointment of a mediator, role of a mediator, conduct of mediation, and conclusion of mediation.
- Upon the conclusion of a mediation and the reaching of an agreement by the parties regarding a dispute, the parties shall enter into a settlement agreement and the same must signed by the parties.
- The mediator shall authenticate the settlement agreement and furnish a copy of the agreement to the parties.
- The settlement agreement shall be binding on the parties.
Modification to the Amount Of Indebtedness
Section 20 of the Act then states that, throughout the operation of the "Covid-19 Act" (from 18.3.2020 to 31.12.2020), a creditor shall not be entitled to present a bankruptcy petition against a debtor, unless the debt owing by the debtor, amounts to RM100,000.00.
Modification to the Hire-Purchase Act 1967
For the period of 1.4.2020 to 31.12.2020, no owner shall exercise any power of taking possession of goods comprised in a hire-purchase agreement under section 16 of the Hire-Purchase Act 1967 for any default of payment of instalment during the period from 1.4.2020 to 30.9.2020.
Indeed, any owner who has exercised his power of taking possessions of goods before the date of publication of this Act (23.10.2020), shall be deemed to have validly exercised such power of taking possession of such goods.
Modifications to the Consumer Protection Act 1999
The relevant modifications are:-
- In the event of default in payment of two consecutive instalments by a purchaser under a credit sale agreement, the credit facility provider shall issue a notice to the purchaser on the settlement of the overdue instalments under the agreement.
- Upon receipt of the notice above, the purchaser may, within 21 days elect to:-
- Pay the overdue instalments to the credit facility provider;
- Make an early settlement of the credit sale agreement by paying the total amount payable under the agreement to the credit facility provider; or
- Terminate the credit sale agreement and surrender the purchased goods to the credit facility provider.
Flowing from the above, if the purchaser elects to make an early settlement, the credit facility provider shall not commence any legal proceedings to recover the total outstanding amount payable by the purchaser under the credit sale agreement.
Do note, however, the modifications stated above shall not apply:-
- if the credit sale agreement was entered into before 18.3.2020; and
- if the purchaser has no overdue instalments before 18.3.2020.
The period of limitation specified in Section 99(2) which expires during the period from 18.3.2020 to 15.6.2020 shall be extended until 31.12.2020.
Modifications to the Distress Act 1951
For the purpose of the recovery of rent due to payable to the landlord by a tenant of any premises, a warrant of distress issued under Section 5(1) of the Distress Act 1951 shall not include the distrain for the arrears of rent for the period from 18.3.2020 to 31.8.2020.
Indeed, any execution of the warrant of distress that has been issued before the date of publication of this Act shall be dealt with accordingly under the Distress Act 1957.
Modifications to the Housing Development (Control and Licensing) Act 1966
The important items to note under this heading are:-
- The developer shall not impose any late payment charges in respect of such unpaid instalment by the purchaser.
- For agreement(s) entered between the purchaser and the developer between the period of 18.3.2020 to 31.8.2020, such period shall be excluded from the calculation of:-
- the time for delivery of vacant possession of a housing accommodations; and
- the liquidated damages for the failure of the developer to delivery vacant possession of a housing accommodation.
If a developer requires further extension(s) of time, the developer may apply to the Minister, to exclude calculation(s) of period of time (up to 31.12.2020) the following:-
- the defect liability period after the date the purchaser takes vacant possession of a housing accommodation; and
- the time for the developer to carry out works to repair and make good defect , shrinkages and other faults in a housing accommodation.
Originally published January 5, 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.