4.CIDB Construction Law Report 2016 PDF

Construction Industry Development Board Malaysia
10th Floor, Menara Dato’ Onn, Putra World Trade Centre,

No.45, Jalan Tun Ismail, 50480,
Kuala Lumpur, Malaysia
© Construction Industry Development Board Malaysia

2017
No copyright is claimed as to any part of the original work prepared by a

government officer or employee as part of that person’s official duties. No
Part of this publication may be reproduced or transmitted in any form or
by any means, including photocopying and recording, without the written
permission of the copyright holder. Such written permission must also be
obtained before any part of this publication is stored in a retrieval system
of any nature.
Any views or opinions presented in this publication are solely those of

the commentators and do not represent those of the Publisher and CIDB.
Commentators were encouraged not to make defamatory statements and
not to infringe or authorise any infringement of copyright or any other legal
right. The Publisher and CIDB each excludes liability for loss suffered by
any person or entity resulting in any way from the use of, or reliance on this
publication.
Published by ARK Knowledge Solutions

(002344785-W)
ISBN No: 978-967-14277-3-6
Printed in Malaysia by Percetakan Jiwabaru Sdn Bhd

TECHNICAL COMMITTEE
Prof. Sr Dr. Wan Maimun Wan Abdullah

Women in Construction Malaysia
Royal Institution of Surveyors Malaysia
A Mu’iz Abdul Razak

Universiti Teknologi MARA
Hj. Abdul Razak Husin

CIDB Malaysia
Ar. Alvin Lim

Pertubuhan Arkitek Malaysia
Chung Soo Kiong

Master Builders Association Malaysia
Darshendev Singh
The Malaysian Bar
Faradhila Zakbah
CIDB Malaysia
Datin Grace Xavier

University of Malaya
Huganeswaran Veerasagram
Kuala Lumpur Regional Centre of Arbitration
Kuhendran Thanapalasingam
The Malaysian Bar
Ir. Lai Sze Ching

The Institution of Engineers Malaysia
Sr Lim Kok Sang

Sr Nazir Muhamad Nor

CIDB Malaysia
Sr Dr. Noushad Ali Naseem Ameer Ali

Nursazwaziha Salehudin
CIDB Malaysia
Ir. Oon Chee Kheng

The Institution of Engineers Malaysia
Ir. Prem Kumar

The Association of Consulting Engineers Malaysia
COMMENTATORS
A Mu’iz Abdul Razak Sr Loo Ming Chee

Advocate & Solicitor (Non-practising) Regional Head, South East Asia
Lecturer, School of Law, UiTM Shah Alam Arcadis (Malaysia) Sdn Bhd
Sr Amran Mohd Majid Nick Powell

CQS, FRISM Director
Public Works Department, Malaysia Axiom Consultants Sdn Bhd
Aniz Ahmad Amirudin Sr Dr. Noushad Ali Naseem Ameer Ali

Partner at Cecil Abraham & Partners CQS, PPRISM, FRISM, FCIOB, FCIArb,
MNZIQS, MRICS
Austen Pereira Chartered Quantity Surveyor
Associate at Cecil Abraham & Partners Chartered Construction Manager
Arbitrator, Adjudicator, Mediator
Tan Sri Dato’ Cecil Abraham Past President
Senior Partner at Cecil Abraham & Partners Royal Institution of Surveyors, Malaysia
Chan Yew Hoong Sr Ong Hock Tek

Advocate & Solicitor FCIOB, FRICS, FCInstCES, FCIArb,
Messrs Azman Davidson & Co FSIArb, FMIArb, FMSAdj, FRISM, ICECA
Arbitrator, Adjudicator, Mediator,
Datuk Chia Lui Meng Reg. QS, Cert. Constr. PM
CQS, FRISM, MRICS Managing Director
Advocate & Solicitor BK Burns & Ong Sdn Bhd/Entrusty Group
Director, UM Land Group of Comp.
Ir. Oon Chee Kheng
Darshendev Singh Advocate & Solicitor
Partner at Lee Hishammuddin Allen & Gledhill Arbitrator, Adjudicator & Mediator
Advocate & Solicitor Messrs CK Oon & Co
Adjudicator, ACIArb (UK)
Chairperson, Young Members Group CIArb Malaysia Ow Sau Pin
MRICS, MMIArb
Garth Rodney McComb Director, ReevesOw Consulting Sdn Bhd
MRICS, ACIArb, MSA
General Manager, Driver Trett, Malaysia Razif Azmi bin Zaki
Legal and Contract Manager at Emrail Sdn Bhd
Datin Grace Xavier Barrister-at-Law (Middle Temple)
Research Fellow, Faculty of Law, UM Adjudicator
Advocate & Solicitor (Non-practising)
Arbitrator & Mediator Steven Shee
Deputy Chairman, Contracts and Practices Committee
Ir. Harbans Singh K.S Master Builders Association Malaysia
Mediator, Adjudicator & Chartered Arbitrator
HSKS Dispute Resolution Chambers Datuk Professor Sundra Rajoo
Director
Huganeswaran Veerasagram Kuala Lumpur Regional Centre for Arbitration
Senior Case Counsel
Kuala Lumpur Regional Centre for Arbitration Tan Swee Im
FCIArb, FMIArb, FCIOB, FMSAdj, FDBF
Janice Tay Consultant at Tan Swee Im, Siva & Partners
Partner at Skrine Barrister-at-Law (Middle Temple)
Advocate & Solicitor Advocate & Solicitor
Prof. Sr Dr. Wan Maimun Wan Abdullah
Karen Ng Gek Suan CQS, FRISM, PPRISM
Partner at Azman, Davidson & Co Director, Khalid Ahmad Architect
Advocate & Solicitor Director, Ahmad Zaki Sdn Bhd
Adjudicator
Wilfred Abraham
Ir. Lai Sze Ching Advocate & Solicitor
Arbitrator, Adjudicator, Mediator Consultant, Zul Rafique & Partners
MEC Integrated Alliance Sdn Bhd
Sr Lim Kok Sang

CQS, FRISM, FRICS, MCIArb.
Principal, Sang QS Consult
ACKNOWLEDGEMENT
The invaluable assistance rendered by the following

CIDB officers is much appreciated
Sr Sariah Abd Karib

Senior General Manager
Policy and Corporate Sector
Sr Mohd Zaid Zakaria

General Manager
Business and International Division
Zainora Zainal
General Manager
Business Division
(April 2016-April 2017)
Sr Nazir Muhamad Nor

Senior Manager
Business and International Division
PUBLISHER’S NOTE 
The Construction Industry Development Board (CIDB) in its pursuit to support

and advance the development of the construction industry in Malaysia, is
pleased to present the latest volume of construction related cases with case
summaries derived from High Court and Appellate Courts decisions from
January to December 2016.
This publication represents an on-going key initiative addressing Quality,

Safety and Professionalism being one among the four strategic thrusts of the
Construction Industry Transformation Programme (CITP) 2016-2020. The
other strategic thrusts are Environmental Sustainability, Productivity and
Internationalisation.
All efforts to achieve a comprehensive, accurate and up-to-date publication

were taken and pursuant to this objective, the following have been included:
(1) Forty case summaries with insightful commentaries, written by experts
and professionals with vast experience in construction law and industry.
(2) 2016 statistics on the construction industry.
(3) 2016 statistics on construction law cases.
(4) Subject index.
The 2016 volume has been further enhanced with the inclusion of commentaries
by professionals from the construction industry, namely engineers, architects
and quantity surveyors adding to the perspective of legal opinions provided by
experts from the legal fraternity.
On that note, this volume is intended to provide a much deeper and wide
ranging insight on the current status of construction law in the country to all
industry stakeholders with an aim to making available crucial information and
trends to assist industry stakeholders in arriving at informed decisions when
conducting their day-to-day affairs.
While every effort has been taken to include all major construction related
cases, some cases may have been inadvertently omitted. The readers are,
therefore, encouraged to conduct further research if and when circumstances
peculiar to their situations arise.
We express gratitude to the technical committee specifically appointed to guide

and advance the purpose of this publication, commentators and the courts
for expending their valuable time and expertise in contributing towards the
publication of this volume.
August 2017
xi
National GDP and Construction Industry Growth Trend
3
Source: BNM
Figure 1
While the National GDP grew at an average rate of 4.2% lower than 5.0% of 2015, the construction sector grew sustainably at an
encouraging rate of 8.2%. This clearly reflects the importance of the construction sector as a major driving force for the national GDP
and economy as a whole.
National GDP and Construction Industry Growth Trend
CIDB Construction Law Report 2016
BASE YEAR:
4
1981 - 2000 : 1980=100
2001 - 2005 : 2000=100
2006 - 2010 : 2005=100
2011 - 2015 : 2010=100
Source: BNM
Figure 2
Since 2011, an upward trend is noticed for the construction sector against the national GDP, replicating similar growth trend seen
between the years 1989 and 1994, as well as between 2008 and 2010.
In 2016, despite national GDP being lower at 4.2%, the construction sector is seen to be robust at a growth rate of 8.1%, clearly
underlining the importance of the sector to the national economic.
Volume of Projects for 2015 & 2016 by States
Volume of Projects for 2015 & 2016 by States
Number of Projects for 2015 & 2016 by States
Source: CIDB Malaysia
Figure 3
Selangor continues to lead in volume of projects in the construction sector in
2016 as it did in 2015 with Johor trailing closely in 2nd position, repeating the
trend in 2015. Wilayah Persekutuan Kuala Lumpur retains the 3rd position as
the state with most volume after Johor in 2016.
5
Project Value (RM billion) for 2015 & 2016 by States
6
Figure 4
Wilayah Persekutuan Kuala Lumpur came out top among all states including significantly surpassing 2015 project value figures by
recording a staggering RM53.1 billion in project value for 2016. Selangor, Sarawak, Negeri Sembilan and Melaka are other states with
increased project value in 2016 compared to 2015.
Volume of Public & Private Projects
7
Figure 5
The private sector continues to take a larger share of the construction market volume in 2016 although a 13% dip in volume of
739 projects is seen against the previous year. The volume undertaken by public sector is reduced at 1,696 projects. This volume
represents a 10 year low.
Project Value (RM billion) Growth Trend by Public & Private Sectors
8
Figure 6
The public sector spiked in its share of project value of RM50.1 billion in 2016, creating the highest record in project value since 2001.
The private sector is also seen on a rebound in 2016, recording higher project value of RM126.2 billion compared to RM115.3 billion
in 2015.
Project Volume and Value (RM billion) for 2016 by Sector
Figure 7
The total project value combining public and private stood at RM176.3 billion
in 2016 with 6,547 projects. Public sector continued its strong support and
stimulus of the construction industry by undertaking 28% of the total share,
valued at RM50.1 billion. The private sector had a robust year, leading with
72% share, valued at RM126.2 billion.
9
Volume of Projects by Categories
10
Figure 8
The trend previously seen in distribution of volume between the categories in 2015 has changed in 2016. The volume of projects in
infrastructure category has surpassed the volume in residential category while non-residential category continues to retain its top
spot at 2,299 projects.
Project Value (RM billion) by Categories
11
Figure 9
2016 represented the highest value in projects totaling RM176.3 billion, with Infrastructure category creating a record value of RM88
Volume of Projects by Categories
billion. Overall an upswing trend is seen in 2016 similar to 2014.

Project Volume for 2016 by Category
653
Social Amenities
(10%) 2,299
Non Residential
(35%)
1,838
Infrastructure
(28%)
1,757
Residential
(27%)
Figure 10
Non-residential projects led in volume with 2,299 projects in 2016, representing
35% from the overall project categories. Both Infrastructure and Residential
almost equalized in volume with 1,838 and 1,757 projects, representing 28%
and 27% of the project categories.
12
Volume of Projects by Local & Foreign Contractors
13
Figure 11
Foreign contractors share on volume of projects represents sustainable growth in 2016. Local contractors continue to represent
majority share of project volume and largely contribute to the overall growth of the construction industry.
Volume of Projects by Local & Foreign Contractors
Contractors’ Registration by Grades and States for 2016
14
Figure 12
Sabah recorded 2nd highest number of registered contractors at 11,249 while Selangor recorded the highest number of registered
contractors at 13,351. Wilayah Persekutuan Kuala Lumpur takes the 3rd position in this ranking. The top 3 highest recorded
registration by Grade was for G1 followed by G2 and G3. Grade G7 took the 4th position in 2016.
Federal Court
Federal Court
Statistics on Construction Cases at Federal Court for 2016
Source: Malaysian Judiciary
Figure 13
11 cases came up to Federal Court in 2016 signaling full judicial process of
construction case resolutions at the Apex court level.
17
Court of Appeal
Statistics on Construction Cases at Court of Appeal for 2016
Figure 14
52% or 66 construction cases at the Court of Appeal was disposed in 2016,
inclusive of cases brought forward from 2015.
18
High Court
High Court
Statistics on Construction Cases at High Court for 2016 by States
Figure 15
66% or 484 construction cases at the High Courts were disposed in 2016,
inclusive of cases brought forward from 2015. Wilayah Persekutuan, Selangor
and Sarawak led with highest number of recorded new cases wherein Sarawak
managed to accomplish 92% case disposals.
19
Construction High Court
Statistics on Construction Cases at Construction High Court

(Selangor & Wilayah Persekutuan) for 2016

Figure 15.1
The specialist Construction High Courts (C Code) set up in Selangor and Wilayah
Persekutuan improved performance of the overall disposal and resolution of
construction cases.
Statistics on Construction Cases at High Court, Shah Alam,

Selangor (C Code) for 2016
Outstanding
Cases
Cases
Dispossed
(59%)
(41%) Figure 15.2
The Construction Court in Shah
Alam, Selangor recorded a positive
performance of 59% case disposal in
2016 with 41% cases outstanding.
Statistics on Construction Cases at High Court, Kuala Lumpur,

WP (C Code) for 2016
Cases Outstanding
Dispossed Cases
(67%) (33%)
Figure 15.3
The Construction Court in Kuala
Lumpur, WP recorded an encouraging
performance of 67% case disposal in
2016 with 33% cases outstanding.
20
Number of Cases Registered in 2016
21
Figure 16
High Court
Wilayah Persekutuan Kuala Lumpur, Selangor and Sarawak are the top 3 states with highest number of registered cases in High Court
for 2016 while Kedah, Melaka, Negeri Sembilan and Perlis did not have any cases registered.
Sessions Court
Statistics on Construction Cases at Sessions Court for 2016 by

States
Figure 17
72% or 360 construction cases at the Sessions Courts were disposed in 2016,
inclusive of cases brought forward from 2015. Wilayah Persekutuan Kuala
Lumpur, Selangor and Pahang recorded the highest number of new cases.
Wilayah Persekutuan Kuala Lumpur disposed 82% of cases i.e. 231 cases.
22
23
Figure 18
Sessions Court
Wilayah Persekutuan Kuala Lumpur, Selangor and Pahang are the top 3 states with highest number of registered cases in Sessions
Court for 2016 while Perlis did not have any cases registered.
Magistrates’ Court
Statistics on Construction Cases at Magistrates Court for 2016 by

States
Figure 19
77% or 272 construction cases at the Magistrates’ Courts were disposed in
2016, inclusive of cases brought forward from 2015. Wilayah Persekutuan Kuala
Lumpur, Sabah and Pahang recorded the highest number of new cases. Johor,
Kelantan and Pulau Pinang recorded 100% case disposal whereas Sarawak
recorded 98% and Melaka 87%.
24
25
Figure 20
Magistrates’ Court
Wilayah Persekutuan Kuala Lumpur, Sabah and Pahang are the top 3 states with highest number of registered cases in
Magistrates’ Court for 2016 while Perlis did not have any cases registered.
An Overview: Malaysian Courts
Statistics on Construction Cases at Malaysian Courts for 2016
Number of Cases Registered
Federal Court: 11
(0.8%)
Sessions Court: 377
(28.5%)
Magistrates' Court: 274
(20.7%)
Court of
Appeal: 82
(6.2%)
High Court: 581

(43.8%)
Figure 21
High Court led with 43.8% of cases registered while Sessions Court and
Magistrates’ Court were almost balanced in percentage of cases registered at
28.5% and 20.7% respectively. Court of Appeal recorded 6.2% of registered
cases with Federal Court recording 0.8% in 2016.
26
An Overview: Malaysian Courts
Number of Cases Disposed
Federal Court: 4
(0.3%)
Court of
Appeal: 66
(5.6%)
High Court: 484
(40.8%)
Magistrates'
Court: 272
(22.9%)
Sessions Court: 360

(30.4%)
Figure 22
Pie chart displays the percentage of construction cases disposed at the
Malaysian Courts in 2016. High Court had the biggest share at 40.8% of cases
disposed while Federal Court recorded 0.3% from the overall total of 1,186
cases disposed at Malaysian Courts respectively.
27
Number of Cases Outstanding
Court of Appeal: 60
Federal Court: 10 (11%)
(2%)
High Court: 252
(47%)
Magistrates'
Court: 83
(15%)
Sessions Court: 137

(25%)
Figure 23
High Court topped the percentage of cases outstanding in 2016 at 47%, followed
by Sessions Court at 25%.
28
Kerajaan Malaysia v Global Upline Sdn Bhd & Another Appeal
Kerajaan Malaysia v Global Upline Sdn Bhd &

Another Appeal *
COURT OF APPEAL, PUTRAJAYA
CIVIL APPEALS NOs: W–01(C)(W)–5–01/2015 & W–01(C)(W)–6–01/2015
DAVID WONG DAK WAH JCA, UMI KALTHUM BINTI ABDUL MAJID JCA,
HASNAH MOHAMMED HASHIM JCA
28 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 31
The Plaintiff/ Respondent was appointed by the Defendant/Appellant to carry

out works in respect of the redevelopment of the Kota Kinabalu International
Airport (“the Airport”). The agreement between the parties was formalized
through the execution of a Principal Agreement and a subsequent Supplementary
Agreement (“SA”). The work to be completed by the Plaintiff was divided into
three (3) sections. Pursuant to terms, the Plaintiff was required to furnish the
Defendant with a performance bond for RM36 million. The Plaintiff’s case was
that since it had substantially completed section 1 of the works, the Defendant
had to issue the Certificate of Practical Completion (“CPC”) and release 50% of
the performance bond amounting to RM18 million. Further, the Airport was
already operational on a 24-hour basis. The Plaintiff claimed that the Defendant
was in breach of the agreement for failing to issue the CPC and for failing to
release 50% of the performance bond. The Plaintiff filed the claim against
the Defendant for breach of the terms of the principal agreement for failing
to issue the CPC upon the completion of section 1 works and a declaration
that the imposition of the liquidated and ascertained damages (“LAD”) in
respect of section 1 and section 2 works by the Defendant was wrongful. The
Defendant contended that based on the terms of the Principal Agreement and
the terms of the SA the Plaintiff had failed to substantially complete the works
to the satisfaction of the project director (“PD”). In order to achieve substantial
completion, the whole of the works as described in Appendix 11A, Schedule
C of the SA had to be completed. The High Court partly allowed the Plaintiff’s
claim by allowing inter alia, (i) a declaration that the Defendant had breached
the contract in failing to issue the CPC upon the completion of Section 1 works
on 30 April 2012 and failing to release 50% of the performance bond; and (ii)
an order compelling the Defendant to pay RM18m to the Plaintiff together
with interest at 5% per annum from the date of judgment until the date of full
settlement. The High Court dismissed part of the Plaintiff’s claim, pleading for:
(a) RM18m being the balance 50% of the performance bond called and retained
by the Defendant; and (b) RM303,000 being a reimbursable claim due to the
Plaintiff for various environmental impact assessment (“EIA”) reports. The
Plaintiff appealed against the part of the High Court judgment dismissing its
claims whilst the Defendant appealed against the whole of the judgment.
31
Held, dismissing the Plaintiff’s appeal with costs, but allowing the Defendant’s
appeal with costs:
(1) An appellate court will not intervene unless the trial court is shown to
be plainly wrong in arriving at its conclusion and where there has been
insufficient judicial appreciation of the evidence. The appellate court will
intervene in a case where the trial court has so fundamentally misdirected
itself. The failure to consider the entirety of the evidence and material
issues or the failure to make findings of fact or the making of bare findings
of fact will invite appellate intervention. Such omissions by a trial judge
will require the appellate courts to take on the role of first instance judge
and review the evidence in its entirety afresh.
(2) In any construction works “completion” would mean that all the
construction works agreed to have been undertaken are completed
except for very minor de minis work not carried out. Even though there
are divergent views taken by the Courts but essentially completion means
the “completion” of all the works that need to be done as agreed under
the terms of the contract. “Completion” would in essence mean that the
project would be in a state of readiness for beneficial use or occupation by
the employer even though there might be some minor defects.
(3) In the instant case, the Judge had failed to give any or adequate
consideration to the contemporaneous documentary evidence evidencing
the progress of the works. Instead undue weight had been accorded to
the oral evidence of one witness, PW2. The High Court Judge erred when
as she relied on the summary of sectional physical progress prepared by
PW2 to conclude that the Plaintiff had achieved substantial completion.
There was judicial misappreciation of the evidence as a whole. The
Plaintiff failed to adduce any other documentary evidence to support the
claim that the Plaintiff had substantially completed the section 1 works as
envisaged under the Principal Agreement and the SA.
(4) The fact that the airport was operational on 24-hour basis should not be
the basis to determine that the Plaintiff had achieved practical completion
as envisaged by the parties when the SA was executed.
(5) The Plaintiff failed to achieve substantial completion and to complete

both sections 2 and 3 works. The High Court Judge was correct to order
the return of the balance 50% of the performance bond.
_____________________________________
* For the case summary and commentary on the High Court decision, see Global Upline v
Kerajaan Malaysia Sdn Bhd [2016] 1 CIDB-CLR 99-104 (published in CIDB Construction Law
Report 2015).
32
COMMENTARY 1
by Tan Swee Im
Consultant at Tan Swee Im, Siva & Partners
Barrister-at-Law (Middle Temple)
Advocate & Solicitor
Introduction
The case provides guidance on the difficulties of determining when
works have been completed, and the interpretation of completion
provisions in the contract.
Kerajaan Malaysia (“KM”) had engaged Global Upline Sdn Bhd (“GUSB”)
to carry out works for the ‘Redevelopment of the Kota Kinabalu
International Airport, Sabah, Package 2: Airside Infrastructure, Air
Traffic Control Tower and New Low Costs Carrier Terminal’ (“the
Project”).
The parties had agreed to a supplementary agreement for additional

work which had been broken up into 3 sections, of which the section in
contention, Section 1, was to be completed by 30 April 2012.
The main issue in contention which this commentary will focus on

is GUSB’s contention that they had achieved practical or substantial
completion of the works under Section 1 on 30 April 2012, on the
strength of their argument that they had completed 98.81% of the
works as of 23 April 2012. With completion KM should have issued the
Certificate of Practical Completion (“CPC”), and released 50% of the
performance bond.
KM on the other hand, contended that based on the terms of the

principal contract and the supplementary agreement, GUSB had failed
to substantially complete the works to the satisfaction of the project
director. In order to achieve substantial completion the whole of the
Section 1 works as set out in the supplementary agreement should have
been completed.
The High Court agreed with GUSB’s contention that they had completed
the Section 1 works by 30 April 2012, accordingly the CPC ought to
have been issued and 50% of the performance bond ought to have
been released. Other claims by GUSB were dismissed. Both KM and
GUSB appealed against the High Court decision and the issues before
the Court of Appeal (“CA”) included whether the Section 1 works had
indeed been completed by 30 April 2012. These arguments included the
33
evidence relied on by the parties to show completion or otherwise, and

the interpretation of completion provisions in the contract. There were
other issues in contention at the Court of Appeal, but this commentary /
review will focus on the completion of the works issue.
The High Court judge had made a finding of fact based on evidence
before the High Court, that GUSB had achieved practical completion
of the Section 1 works by 30 April 2012 by relying on the summary
of sectional physical progress of Section 1 works as of 30 April 2012
prepared by GUSB’s witness, showing that 98.81% of Section 1 works
had been completed by 30 April 2012. The format adopted by GUSB to
calculate the level of completion was reasonable and fair.
At the Court of Appeal (“CA”), it was emphasised that an appellate court

will not intervene unless the trial court is shown to be plainly wrong
in arriving at its conclusion and where there has been insufficient
appreciation of the evidence. The principle upon which an appellate
court could interfere with findings of fact by the trial court is "the plainly
wrong test" principle.
On the question of interpretation, the CA found that according to the

terms of the supplementary agreement read with the principal contract,
substantial completion meant that Section 1 works must be fully
completed before KM can issue the CPC.
On the question of evidence, the CA found that the High Court had
given inadequate consideration to the contemporaneous documentary
evidence of the progress of the works. The High Court had also given
undue weight to the oral evidence of one witness who had testified on
the summary he had prepared showing that 98.81% of Section 1 works
had been completed by 30 April 2012, which had not been submitted
to KM’s consultant for verification. The CA found that the summary was
not supported by other evidence oral or documentary. The High Court
decision on completion of the works was overturned by the CA.
Lessons learnt from the case

The issue of when completion of the works has been achieved is an issue
of fact, and a vexed issue. It has been the source of much argument and
legal proceedings over the years.
The contractual provisions need to be as clear as possible to guide

parties as to what constitutes completion, be it practical completion,
substantial completion, 100% completion or otherwise. Most contracts
use generic terms as in this case, and this is a source of continued factual
argument by parties despite legal precedents on its definition.
34
The evidence to support a decision on such an issue of fact must exist

and be clear. It should ideally be agreed between the parties but at least
the Contractor’s records of completion should be notified to the other
party on a regular basis. It was an issue of the evidence available and
the quality of that evidence that led to different decisions by the High
Court and the CA.
Suggested best practices to be adopted

"Documents, documents, documents", is an adage consistently repeated
in the construction industry. However the lack of documentary evidence
to support contentions made in legal cases remains a perennial problem.
Proper documentation of progress and completion, documentation
of the inspection process, sign offs of inspections carried out and
defects rectified, are but a few of the documents which parties to any
construction contract need to diligently upkeep.
These documents represent the parties’ views as to actual progress on

site, and ought not to be kept unilaterally by a party without sharing
with the other. When used in legal proceedings, unilateral documents
which have not been circulated at the material time are viewed with
some circumspection, as possibly having been manufactured to suit the
legal proceedings.
Contract provisions should be clear as to what is required; in this case,

what is required to achieve completion and the issuance of CPC, which
trigger attendant issues such as the performance bond. The Conditions
of Contract will almost always have to use generic terms such as in this
case, but they can be supplemented by the technical documents forming
the contract such as drawings, specifications and bills of quantity to
elaborate the intent of the generic terms in the conditions. Practical
completion may be defined, for example, to include the delivery of as-
built drawings.
The lack of clarity in project documentation as to the specific intent

to be achieved, and the corresponding lack of contemporaneous
documentation to support the facts as alleged, have kept many a
construction lawyer busy.
35
COMMENTARY 2
by Datuk Chia Lui Meng
CQS, FRISM, MRICS
Introduction
This case highlights the distinction between total completion and
substantial or practical completion. It also distinguishes between
outstanding works and uncompleted works which are not accepted or
found unsatisfactory by the Project Director.
In construction practice, the intent and purpose of a Construction

Contract is to identify the Scope of Works to be completed and handed
over to the Employer for their intended purpose and use. In this instance,
Section 1 works had been clearly spelt out and was to be delivered to
the Employer on or before the extended completion date i.e. 30 April
2012. However, prior to the expiry of the extended completion date,
the Project Director inspected the works and listed down a number of
outstanding works which would need to be completed and declared that
he was unable to issue the Certificate of Practical Completion (“CPC”)
and for the Section 1 Works to be handed over to the Employer. On the
facts, Taking Over Certificates (“TOC”) were also issued.
In reality, there is a difference between a TOC and a CPC, that is, in actual
circumstances the Project Director issues a CPC when a milestone
is achieved in the Contractual Provision before issuing a TOC for the
Employer to take over the Works for his intended purpose and use.
The CPC is issued by the Project Director upon being satisfied that the
works were substantially completed and if he is of the opinion that the
Employer will face no obstruction in using the works for its intended
purpose. However, there is no requirement that the whole works have
to be wholly completed and commissioned before such certificate
can be issued. Where there is a list of outstanding works which is
de minimal and not material, this shall not prevent the handing over
of the works to the Employer for his intended purpose and use. This
list of outstanding works can be completed by the Contractor within
a stipulated completion period after the issuance of the CPC. If the
outstanding works are still not completed by this stipulated period,
then the CPC may be withdrawn and ceases to be valid.
36
The Defendant had argued that the CPC was intended to convey that
all the works as therein contained in the Scope of Works in Section 1
was to be wholly completed and not substantially. If this was so, then
the intent and purpose of practical and substantial completion is lost.
Furthermore, the satisfaction of the Project Director is to be assessed
objectively rather than subjectively.
It was submitted that the Employer had utilised the works upon the
substantial completion and the facilities were used for the operation of
the New Low Cost Terminal. Although the Project Director did not issue
any CPC, the conduct of the Employer in the use of the works would
have implied that a Taking Over had been completed. It is usually the
case in the Construction Industry that due to exigencies, many projects
are taken over by the Employer even before the issuance of CPC and
the dates of the transfer of site possession is deemed to be practical
completion.

The term “practical or substantial completion” should be clearly defined
and distinguished from the term TOC. If substantial completion is
interpreted as wholly completed and the whole scope of works needs
to be fully completed, then this definition needs to be stipulated in the
Agreement.
In addition industry norms would have interpreted “outstanding works”

as de minimis works which could be completed later but do not prevent
the works from being used for its intended purpose. If it is “uncompleted
works” then these works would need to be wholly completed before the
Project Director decides to issue the CPC.

Upon substantial completion of the works and when the Contractor is
ready to apply for the issuance of CPC, the Contractor should write to
the Project Director to inform him of his intention of applying for the
CPC and submit the evaluation of the physical progress of works in the
particular section.
Furthermore, the Project Director should objectively determine

what amounts to substantial completion and this should include a
consideration of whether the Employer is able to use the works for its
intended purpose and that the outstanding works remaining does not
obstruct the said purpose.
37
Mehrzad Nabavieh & Anor v Chong Shao Fen & Anor

and Another Appeal
CIVIL APPEALS NOs: W–02 (NCVC) (W)–1698–07/2013 &
W–0 2(NCVC) (W)–1699–07/2013
ALIZATUL KHAIR OSMAN JCA, LIM YEE LAN JCA,
NALLINI PATHMANATHAN JCA
24 MARCH 2016
_________________________
[2017] 1 CIDB-CLR 38
Chong Shao Fen and Lai Siow Lien (“Plaintiffs/Respondents”) were the owners
of a three-storey bungalow in Bukit Pantai, Kuala Lumpur (“the Plaintiffs’
property”). Mehrzad Nabavieh and Noushin Goudarzi (“First and Second
Defendants/Appellants’) were the owners of the lot adjoining the Plaintiff’s
property (“the neighbouring property”). The other Defendants in the High
Court were the architect (“Third Defendant”), the independent contractor
(“Fourth Defendant”) and the civil engineer (“Fifth Defendant”). The Plaintiffs
had been residents at the Plaintiffs’ property since 2001. In May 2009, the First
and Second Defendants commenced work on the neighbouring property with
a view to demolishing an old structure and to construct a two-storey (above)
and three-storey (below) bungalow ("the project"). The Plaintiffs complained
that as a result of the demolition works, the Plaintiffs’ property was damaged
with cracks appearing on the Plaintiffs’ bungalow and a large hole appearing
in the garden. The Plaintiffs thus commenced a suit against the Defendants in
negligence. The Plaintiffs alleged negligence on the part of the First and Second
Defendants as Employers in failing to oversee or supervise or rectify the acts
or omissions of the independent contractor. The evidence adduced through
two experts disclosed that the loss and damage suffered by the Plaintiffs was
caused by the acts and omissions of the Fourth and Fifth Defendants, and the
First and Second Defendants in failing to supervise or causing the Fourth and
Fifth Defendants to rectify the damage. The issue that arose for consideration
was whether liability should be limited to the first two Defendants only on the
basis of the existence of a non-delegable duty of care, or whether such liability
was jointly shared amongst all the other Defendants, as tortfeasors. The learned
High Court Judge (“the Judge”) found that the First and Second Defendants only
were to be held liable for the entire loss and damage suffered by the Plaintiffs.
The Third, Fourth and Fifth Defendants were held to be not liable for this loss
and damage on the grounds that the duty of care owed by the First and Second
Defendants to the Plaintiffs was a non-delegable duty. Two appeals were filed
against this decision, i.e. one by the First and Second Defendants against the
decision in allowing the claim against them only, but not the other Defendants;
and another by the Plaintiffs against the dismissal of their claim against the
Third, Fourth and Fifth Defendants.
38
Mehrzad Nabavieh & Anor v Chong Shao Fen & Anor and Another Appeal
Held, dismissing the First and Second Defendants’ appeal but varying the relief
granted and allowing the Plaintiffs’ appeal with costs:
(1) The Plaintiffs had not pleaded any non-delegable duty. The Plaintiffs
sought a prayer for joint liability amongst the Defendants as tortfeasors.
The issue of non-delegable duty was not put to the parties to allow them
to invoke or submit on this issue.
(2) The First and Second Defendants would be vicariously liable for the acts
of the Third to Fifth Defendants if they were servants/agents. But if they
were independent contractors, the general principle applied, i.e., that the
Employers would not be liable for their negligent acts.
(3) If the Employer determines what is to be done and retains control of the
actual performance, the doer is a servant/agent. However, if the Employer
prescribes the work to be done but leaves the manner of doing it to the
control of the doer, the doer is an independent contractor. The Third to
Fifth Defendants fell within the category of independent contractors
rather than servant/agents. To that extent the general principle would
prevail, i.e., that the First and Second Defendants would not be liable for
the negligent acts of the Third to Fifth Defendants.
(4) The general rule is that one is not responsible for a tort by an independent
contractor. But the exception is where the activity involves some special
risk of damage, or is work which from its very nature is likely to cause
danger/damage.
(5) Non-delegable duties were exceptions to the general principle, that

Employers were not liable for the acts of independent contractors. Non-
delegable duties were dependent upon a finding that the Employer is in
breach of some duty personally owed to the Claimant. If the law imposed
a strict duty on the Employer, then his duty cannot be discharged by
delegating work to an independent contractor.
(6) The Employer is liable for extra-hazardous acts of independent

contractors. However, it should not be an unshakeable presumption that
Employers are liable for dangerous acts of independent contractors. Each
act and its circumstances should be looked at to determine whether an
Employer should be liable for the tort of the independent contractor.
(7) The evidence from the expert reports showed that the both the First and
Second Defendants as well as the other Defendants should be liable in
negligence to the Plaintiffs. None of the factors that give rise to a non-
delegable duty of care were present on the facts of the case. As such, the
Judge erred in invoking and applying the proposition of law that the First
and Second Defendants owed a non-delegable duty of care to the Plaintiffs
to the exclusion of the other Defendants.
39
(8) The independent contractor and engineer were joint tortfeasors with the
owners of the neighbouring property. The contractor (Fourth Defendant)
was 40% liable for the damage suffered by the Plaintiffs together with
the costs of the restitution works carried out on the property. The
engineers (Fifth Defendant) were 30% liable for the damage suffered
by the Plaintiffs together with the costs of the restitution works carried
out on the property. The liability of the First and Second Defendants was
therefore reduced to 30%. No liability was attributable to the architect
(Third Defendant).
COMMENTARY 1
by Tan Sri Dato’ Cecil Abraham
Senior Partner at Cecil Abraham & Partners
Aniz Ahmad Amirudin
Partner at Cecil Abraham & Partners
Introduction
The recent decision by the Court of Appeal in Mehrzad Nabavieh’s case
highlights to what extent employers can still be made liable for the acts
or omissions of their independent contractors. In other words, whether
the principle of non-delegable duty still applies rendering an employer
solely liable despite the engagement of independent contractors.
The Plaintiffs were the owners of a bungalow in Kuala Lumpur which

suffered damages as a result of construction works in the adjoining
property. As a result, the Plaintiffs instituted legal action against their
neighbour and the neighbour’s architect, independent contractor and
civil engineer.
The High Court found that only the neighbours/employers were to be

held liable for the damages suffered by the Plaintiffs as the duty of care
owed by the employer was a non-delegable duty as enunciated in the
case of Bower v Peate [1876] 1 QBD 321.
The issue that arose for determination in the Court of Appeal was
whether liability should be limited to the employers only on the basis of
the existence of a non-delegable duty of care, or whether, such liability
should be jointly shared amongst the architect, independent contractor
and civil engineer, as tortfeasors.
The Court of Appeal considered the extent of non-delegable duty of

care in constructions matters and case law subsequent to Bower v Peate
40
(above) and found that it is settled that an employer will not generally
be responsible for any tort committed by an independent contractor
in the course of the execution of the work. This was due to, amongst
others, an independent contractor cannot be held as servants/agents of
an employer and if so, the employers would be vicariously liable for the
acts of the independent contractors if they were servants/agents.
However, the Court of Appeal was of the view that there could be
circumstances where an employer could still be made liable such as
the present case where the employers were found to be negligent in
failing to oversee or supervise or rectify the acts or omissions of the
independent contractor.
Having held as such, the Court of Appeal was also of the view that the
independent contractor could not be completely exempted from liability
even if the employer had a common law non-delegable duty to bear all
responsibility. Further, based on the expert reports produced by the
Plaintiffs at trial, the Court of Appeal found that the damages suffered
by the Plaintiffs were caused by the lack of proper measures taken by
the contractor and civil engineer to prevent damage.
As such, the Court of Appeal apportioned liability between the

employers, contractor and the civil engineer in the percentage of 40%,
30% and 30% respectively for the damages caused to the Plaintiffs’
property.
The Malaysian position can be compared with the position taken by the
Singaporean Courts where in the recent case of Ng Huat Seng and Anor v
Munib Mohammad Madni & Anor [2016] SGHC 118, the Singapore Court
of Appeal found that employers were not vicariously liable as they had
engaged an independent contractor to do the works and neither did the
employer owe a non-delegable duty arising out of the performance of
the independent contractor. It should be however noted that the Court
did take into account that the employers had not failed to exercise due
care in the selection of the independent contractor and that an employer
can be found liable where the works involved are particularly hazardous
and/or extra hazardous in nature giving rise to a non-delegable duty of
care.
Further and by way of a comparison in a situation involving the

employer against a contractor and architect, the Singapore Court of
Appeal in Management Corporation Strata Title Plan No. 3322 v Tiong
Aik Construction Pte Ltd & Anor [2016] SGCA 40 considered the central
issue of whether, and to what extent, the developer / owner had
recourse in tort against the builder and the architect for building defects
in a condominium development when the defects were not caused by
41
the negligence of the builder and/or architect, but by the negligence of

their sub-contractors. The Court held that there was no basis for finding
a broad statutory non-delegable duty and that it would also not be
consistent with the spirit of the Building Control Act 1999 to impose
such a non-delegable duty in common law.

The position in Malaysian and based on the recent decision by the Court
of Appeal, it appears that an employer can still be made liable (even if not
fully) for damages if the activity involves some special risk of damage,
or is work which from its very nature may likely cause damages and the
employer cannot free himself from liability by engaging an independent
contractor to take the necessary precautions.

Although there are many types of employers from a simple house
owner to a major developer appointing independent contractors for
construction, an employer can now be expected to be more vigilant to
check and supervise the works of its independent contractors to ensure
works are carried out according to the acceptable standards and to
avoid any damages for all types of construction activities. This would
naturally start with the selection process itself of appointing the right
construction professionals for the job.
Although the recent Court of Appeal decision may appear to impose

an additional burden on an employer to discharge, the question arises
whether an employer would be the right person to undertake the
obligations such as being aware of the technical details involved in
construction and being able to check on the materials and workmanship
and avoid damages. This may be another issue for the Courts to consider
in the future.
42
COMMENTARY 2
by Sr Loo Ming Chee
Regional Head, South East Asia
Arcadis (Malaysia) Sdn Bhd
Introduction
This is a common construction issue, namely the claim of subsidence of
unsupported soil to adjoining properties.
The expert witness opined that the collapse of the boundary wall and
garden area of the adjoining property resulted from the unsupported
excavation at the construction site; and that the extensive and deep
excavation along the boundary of the adjoining property was made
without adequate safety protection, and proper temporary support was
not provided by the contractor during the excavation.

The evidence presented by the two experts highlighted the importance
of:
(1) having competent architects, engineers and contractors for the
execution of construction work; and
(2) great care must be taken by those responsible to supervise the

execution of construction work on any site.
It would appear, from the scant information available in the law report,
that the parties did not adopt existing best practices.

(a) Contract
Having a detailed contract specifying the obligations of the
parties so that disputes maybe avoided in the future. This would
also determine how risks will be shared or divided on the project.
In this case, if there was a written contract between the parties,
the difficulty of the work such as demolition and excavation
would have been recognised and due precautions taken.
(b) The importance of Health and Safety

A construction site is prone to many potential hazards. Most
accidents may be avoided by implementing strict protocols and
ensuring those protocols are followed. In this case, it was the
opinion of the expert witness that the architect, engineer and
contractor had been negligent and put the lives of the Plaintiffs,
and their property at high risk.

43
No work should take place until adequate safety inspection and

mitigation steps are in place.
Safety best practices include:
(i) Dilapidation Survey

The contractor could have conducted a dilapidation survey of
the existing structural condition of the surrounding buildings
and structures before the commencement of demolition,
construction or development. Dilapidation survey is important to
(A) identify pre-existing structural defects and prepare adequate
protection against possible damage to surrounding structures;
and (B) avoid unwarranted third party claims. It was not known
if such dilapidation survey was carried out, and if there were
pre-existing structural defects in the surrounding buildings or
structures.
(ii) Method of Construction

The methods of construction for temporary works are pertinent
to ensure the permanent works are carried out and completed
with minimum issues. Best practice requires the contractor to
submit method statement together with calculations to the
engineer for approval prior to commencement of the excavation
works, and once approved the contractor should not deviate
from the agreed methodology.
(iii) Insurance
In construction, it is important to recognise the hazards and
mitigate potential risks and this includes undertaking the
necessary actions or making provisions for eliminating or
preventing them from occurring. Sometimes, the risks are
unavoidable or unforeseen. As such, it is important for the
employer to insist that the contractor take out and maintain
relevant and adequate insurance for the project, including
insurance for the works and third party liability insurance, prior
to commencement of work and during the construction period.
The insurance should be in the joint names of the employer and
contractor and include a “cross liability” provision.
In conclusion, it would appear that the issues have arisen as a result

of not following best practice. These standard practices are already
common place in the construction industry and the use of such practices
would appear to be absent in this instance.
**Acknowledgement: Many thanks to the in-house contract support team of JUBM Sdn
Bhd who have helped in the analysis.
44
Pembinaan Teris Sepakat Sdn Bhd v Kumpulan Ikram Sdn Bhd & Anor
Pembinaan Teris Sepakat Sdn Bhd v Kumpulan

Ikram Sdn Bhd & Anor
CIVIL APPEAL NO: B–02(W)–752–05/2015
VERNON ONG LAM KIAT JCA, ABDUL RAHMAN SEBLI JCA, HASNAH
MOHAMMED HASHIM JCA
13 MAY 2016
_________________________
[2017] 1 CIDB-CLR 45
Jabatan Kerja Raya (“the Employer”) had appointed the Appellant/Plaintiff as

the main contractor for a road construction project (“the Project”). The First
and Second Respondents/Defendants were related companies providing soil
investigation works. The First Respondent was appointed by the Appellant
to conduct soil investigation (“SI”) at the site of the project. The Appellant
appointed RMR Consult (“RMR”) as the consultant engineer for the said project.
RMR instructed the First Respondent to conduct SI works at the project site
and to carry out 7 exploratory boreholes, 4 hand augers, 3 Piezocone tests and
16 Mackintosh probes to be carried out on the locations as indicated in the
plans. After completing the SI the First Respondent prepared and submitted
the SI reports dated 22 October 2003 ("the First SI Report") to the Appellant.
RMR then instructed the First Respondent to carry out further tests on the
exploratory borehole results and the test reports, were submitted to RMR on
23 December 2003. RMR, in reliance on the Employer’s approval of the First
Report as well as the other test reports proceeded to design the Project. The
design was then approved by the Employer and was handed to the Appellant
to proceed with the construction at the Km 11 - Km 14 stretch of the Project.
However, when the construction works were approximately 80% completed a
massive road embankment fill failure occurred. The Employer then terminated
the construction contract with the Appellant. The Appellant thus instituted this
suit against the Respondents claiming all losses and damages suffered arguing
that the embankment failure was because of the inaccuracy/error in the First
SI Report as it failed to disclose the presence of the thick layer of very soft to
soft silty clay. At the trial the primary issue before the Court was whether the
First SI Report prepared by the First Respondent was inaccurate and erroneous
and the sole cause of the embankment fill failure. Both parties called their own
experts to assist the trial court in determining the issue. The learned Judicial
Commissioner (“JC”) dismissed the Appellant’s claim on the ground that the
soil investigation that was carried out was not inaccurate or erroneous but
instead it was due to insufficient soil investigation that resulted in inadequate
design of the embankment. Hence the present appeal against the JC’s decision.
The Appellant claimed that the Respondents had a duty in contract and tort to
exercise reasonable care, skill and diligence when conducting soil investigation
works. According to the Appellant, the Respondents were in breach and/or
negligent in the preparation of the First SI Report.
45
Held, dismissing the appeal with costs:
(1) The Appellant failed to specify the inaccuracy or error in the preparation
of the First SI Report. The pleadings of the Appellant merely stated in
general that the First SI Report failed to disclose a 15 to 16.5 meters thick
layer of very soft silty clay at the area where the road fill embankment
failure occurred.
(2) The JC, having considered thoroughly both the expert witnesses’ testimony
leaned towards the Respondents’ expert witness. The Respondents’
expert explained that since the boreholes were done on the road shoulder
of the existing old road constructed 20 years earlier they were likely to be
dissimilar with the boreholes conducted post 2007 on virgin river bank
ground and on recently constructed embankment.
(3) The mere comparison of the bore logs was inconclusive and insufficient to
ascertain that the Respondents were negligent and that the First SI Report
was inaccurate or erroneous. RMR as the consultant engineer responsible
for the design had relied on the 2003 bore logs in particular BH-BH4.
RMR should have considered the available soil data in the area such as the
Piezocone PZ-2 test results which showed weaker soils of SPT value of 1-3
for depth about 0.55 to 13.7 meters beneath the ground surface.
(4) The First Respondent had carried out the SI according to the instruction
of RMR. As design consultant RMR should have at that material time
reverted to the Appellant or even undertaken further SI and soil strength
test as they were aware of the condition of the terrain surrounding the
project site.
(5) The Respondents were well known contractors specialising in soil

investigation and were designated to the Appellant by the Employer. A
contractor is expected to carry out his function in a workmanlike manner,
using all proper skill and care. As a SI specialist the First Respondent
owed the Appellant the duty of care to use reasonable skill and care.
(6) There was no credible evidence to prove that the First Respondent had in
any way breached the standard of duty of care required of it. There was
no evidence of any non-compliance of the Standard Engineering Practice
as stipulated in clause 5.3, Section E of the Technical Requirements by
the First Respondent. There could be no negligence on the part of the
Respondents as they exercised reasonable skill and care as soil specialist
when they conducted the SI as instructed and in accordance with the
standard engineering practice.
(7) No appealable error had been shown by the Appellant that could properly
justify an appellate intervention. The JC had made various findings of fact
impacting on the crucial issues. His findings had been supported by the
46
evidence as led before him and his findings had not been without basis.
The JC’s findings had been made with cogent reasons and there was no
reason to disturb the same.
COMMENTARY 1
by Razif Azmi bin Zaki
Adjudicator
Introduction
The Appellant, the main contractor for a road construction project,
claimed for breach of contract and negligence against two Respondent
soil investigation companies following a massive embankment fill
failure. The claim was dismissed following evidence from expert
witnesses for both parties. The Court of Appeal affirmed the decision,
concluding that the Judge at first instance had validly made findings of
fact based on the evidence.

Soil conditions can present some of the most variable unknown
quantities in construction, and this case highlights the care needed
when considering preparatory investigations. The following are some of
the legal issues that may arise in claims alleging professional negligence.
(1) Establishing Breach of Contractual or Tortious Duty

A party seeking to allege fault needs to be precise as to how the
error came about. Here, the Appellant’s pleadings “merely state in
general” that the Soil Investigation (“SI”) report failed to disclose
very soft silty clay at the sites where the failure occurred. They had
failed to specify properly the inaccuracy or error in the preparation
of the report and this failure was one of the reasons for the Court
dismissing the claim.
In this case, the Respondents were actually found to have carried

out the bore-hole testing adequately, and were found to have
complied with the instructions as to locations to be tested. Their
results for the specific sites tested were found to be reliable, and it
therefore could not be said that they had breached their contractual
or tortious duty to the Appellant.
47
(2) Duty of Care to be Applied

The Court of Appeal confirmed the continuing relevance of Bolam
v Friern Hospital Management Committee [1957] 2 All ER 118, and
the standard of duty of care to be applied in cases of professional
negligence, whereby a professional is to be assessed or judged by
the standards and practice of the profession as a whole.
(3) Expert Witnesses

This case further highlighted the fact that whilst expert witnesses
can be very helpful, it is ultimately for the Court to decide whether
to accept their expert opinion in light of all the evidence in the
case. The expert in a case has an essentially advisory role, and
their opinions can only be as strong as the facts or assumptions
on which they are based. Here, the Judge at first instance reviewed
expert evidence from both parties, and was perfectly entitled to
prefer one view over the other.

Establishing Breach of Contractual or Tortious Duty
In pursuing a claim for this type of breach of contract or negligence, it
is not enough to rely on general pleadings that simply allege error or
wrongdoing.
The doctrine of res ipsa aside, what is necessary is particularization

at every stage of what is alleged, which is then related to proving that
the conduct fell below the standards of the relevant industry standard
practice and requirements. Whilst not necessarily determinative,
reference to codes of practice of professional bodies is likely to assist.
Duty of Care and Causation

It is not always obvious whether a duty of care exists, and the first
consideration has to be whether it does, and what the scope of that
duty is. A third party contractor, for example, may wish to rely upon a
soil investigation report that was prepared for another party entirely.
Whether there is a duty in those circumstances will likely depend on
the surrounding facts.
Of course, in the event negligence can be established, parties should

further remember that causation needs to be proved, and that the loss
was not too remote—that the fault or breach was the direct cause of the
loss claimed for, or that it was reasonably foreseeable.
There are often a multitude of other operative factors in claims following

construction failure or defects. For example, deficiencies in design,
manufacturing, and maintenance, or even the effects of adverse weather,
48
can be intervening causes or factors that may make causation difficult to

ascertain. Parties on both sides of a claim are well advised to critically
assess such possibilities before becoming embroiled in litigation.
Other Considerations
Consideration should also be given to whether vicarious liability arises
where one is under the employment or instruction of another, or
whether any other party may be open to the allegation of contributory
negligence.
Additionally, it always serves a party well to think ahead. In drafting

contracts for professional services, it would be prudent to consider
allocation of risk and careful definition of rights and liabilities.
Unambiguous disclaimer clauses may ultimately assist in defining limits
of responsibility and liability.
49
COMMENTARY 2
by Nick Powell
Director
Axiom Consultants Sdn Bhd
Introduction
This case involved a number of issues arising out of a site investigation,
the subsequent design of a road embankment based on that investigation
and whether or not the site investigations specialists (the Respondents/
Defendants) were ultimately responsible for the collapse of that
embankment. The Court of Appeal judgment affirmed the decision of
the High Court, and dismissed the Appellant’s/Plaintiff’s case with
costs.
The Appellant had been contracted by JKR (the Employer) to build

approximately 5km of road (in two separate stretches), for nearly
RM6million with a design and build responsibility. In 2007, all appeared
to be going well, eighty percent (80%) of the project was completed, only
for a massive road embankment fill failure of some of the constructed
works which effectively derailed the entire project.
The engineering investigation(s) at the failed embankment site (post

the embankment failure in 2007and afterwards) showed a thick layer
of very soft to silty clay at the site to be the root cause of the failure. The
design of the works had been based upon a Soil Investigation (the First
“SI”) carried out in 2003. That First SI had not indicated the presence of
this thick layer of very soft to silty clay.
JKR terminated the Appellant’s contract on the grounds of their poor

progress with the works.
The Appellant then sued the Respondents (the specialist companies who
had carried out the SI) for the losses and damages they had suffered. The
Appellant’s contention was that that the First SI was either inaccurate
or wrong and that the Respondents were liable (in contract and/or tort)
for that inaccuracy/error.
The Appellant conducted a multi faceted approach to identify

inaccuracy/error by the Respondents. Each approach was, in turn,
examined in detail by the High Court and that examination was explicitly
acknowledged by the Court of Appeal.
The Appellant advanced an argument, by Expert Witness evidence,

that the relevant parts of the 1st First SI were likely to be fictitious,
50
because they showed a rock type that was present only 165km away.
The Respondent was able to show that this rock type was present at
a site only 21km from the project site, thus rebutting the Appellant’s
argument.
The main argument of the Appellant’s was however that the Respondents
moved the location of the most relevant borehole (BH4) of the First SI
from its intended position to the position actually carried out (and did
not inform the Engineer that they had done so). The Appellant’s Engineer
had indicated the location of the seven (7) boreholes, including BH4, on
a plan drawing. This drawing was at a scale of 1:1000, and, verbatim
from the Court of Appeal decision, “...it was not possible to determine
the exact location of the borehole from the drawing itself...”.
Given that the Appellant’s design consultant (the Engineer) had intended
that BH4 be conducted in the swamp area of the location, rather than
the hard shoulder of the existing 20 year old road carriageway, the
failure to define the exact location for BH4 lead onto the importance of
the five (5) other main Court findings, namely that :
(1) the Respondents were perfectly entitled, in the absence of

information to the contrary, to carry out BH4 on the road shoulder,
given that the project was that of road widening and that this
“was standard practice and sensible as the Project involved the

upgrading of the old road...”.
(2) preferring the evidence of the Respondent’s Expert, the High

Court was persuaded that investigation results (BH4 of the First
SI) at the road shoulder (of a 20 year old road construction),
and the investigation results at the virgin river bank/swamp
(the location of the failed new embankment slope) were likely
to be dissimilar. Hence, as was indeed the case, the First SI
(2003) would be likely to indicate differing results to the SI’s
constructed post embankment failure (2007).
(3) the Engineer had other data from the First SI (Piezocone tests as
opposed to boreholes) indicating a weaker soil stratum than the
BH4 result.
(4) the Engineer was responsible for the design, and “… As design
consultant RMR should have at that material time reverted to the
appellant or even undertaken further SI and soil strength test as
they were aware of the condition of the terrain surrounding the
project site …”.
51
(5) the Respondents were responsible for the SI work itself, and
because the Appellant’s could not introduce and/or show any
Respondent default against the requisite codes and practices
for such actual investigative work, the Respondent had fulfilled
their obligations (whether at contract and/or tort).

It should be blindingly obvious to all of those actively involved in
infrastructure work that poking seven (7) holes in the ground for a 5km
stretch of future road works (the 7 borehole locations of the First SI)
may not provide a comprehensive picture or forecast for the ground
under the entire road construction project. What may be less obvious is
the type and extent of the responsibility that the various parties in the
process hold to each other.
Apart from the JKR/Government role to manage the contract and pay
for the constructed works, there were three main players in this road
project problem. The Main Contractor (the Appellant), their Engineer
(RMR) and the Soil Investigation Specialists (the Respondents).
The Contractor’s role was to construct the works properly, the Engineer
would have to design the works properly and the Soil Investigation
Specialists would need to carry out the soil investigation actual work
properly. The Court's decisions made it reasonably clear that each of
those parties would be held responsible for their work only, but (save
presumably for special circumstance not examined in this case) not to
second-guess the work of any other Party.
Hence, while the SI results from BH4 were likely to be dissimilar

between the two adjacent locations (the shoulder of the 20 year old
existing road vs the swampy area for the new road embankment), the
Soil Investigation Specialists were under no obligation to bring that to
the attention of the Engineer. Doubly so, given that other SI data should
have prompted the Engineer to delve further into a potential problem
area.
Parties should take from this decision differing lessons. Engineers

may want to include specific provisions for Specialists to identify
patently differing topography/conditions in the vicinity of their actual
instructed investigative works, rather than simply/only report the
data of the investigation itself. Specialists may wish to caveat their
commercial terms to limit their responsibility to compliance only with
code or standard, and/or to delimit any damages exposure because
those damages claims could be several times their investigation fee.
52
Employers (whether on a design and build or build only contract format)

should take cognisance of the importance of the front-end investigation
works and the cost of getting them wrong.
The decisions reached by the Courts should serve to drive home the
clear message to the industry that parties in the construction process
have differing roles to play, correspondingly different obligations and
responsibilities and should not rely on other parties to provide a second
guessing role, notwithstanding any inherent knowledge and expertise
that each brings to the construction enterprise.
This judgment provides all parties actively involved in similar decisions

and projects, the opportunity to revisit this well-known project risk area,
and analogous risk areas and situations, with a clearer understanding of
who will, most likely, be held liable for the main risk events.

The reality is that soil investigations can only indicate the likely soil
conditions. There is no guarantee that any soil investigation will
anticipate all the problematic soil conditions on the project. Hence
the balance will always need to be struck between the costs of the
investigation compared to the risk of designing and then building with
insufficient data. Equally the importance of post soil investigation
review cannot be overstated.
Since the Courts so clearly found that the 1:1000 plan drawing lacked
the degree of precision required by them to identify an exact required
location (for the SI), this should be actively addressed by the industry.
It is common practice for the intended location of specific soil or site

tests to be indicated on large format/scale drawings. Provision of a grid
references, co-ordinates or similar to precisely identify the required
location(s) of specific investigations, or terrain, are the exception
rather than the norm. Hence if parties require investigation of a specific
topography or a specific location or a specific type of location, this
would need to be specified with a much higher degree of precision than
is currently generally practiced.
In respect to whether or not best practice would be best served by

creating bespoke obligations within their respective contracts for
parties to provide a second guessing role as part of their obligations, or
to make it explicit that there is no such obligation, parties remain free,
as they should be, to contract on whatever terms are acceptable to both.
This second-guessing role is not a question of best practice, but one of
freedom to contract as parties deem fit. Parties should however be clear
that no obligation exists (to second-guess another party’s scope) in the
absence of a specifically worded contractual obligation to that effect.
53
Perbadanan Menteri Besar Kelantan v Syarikat

Perusahaan Majubina Sdn Bhd
CIVIL APPEAL NO: D–02–2031–09/2013
ABANG ISKANDAR JCA, BADARIAH SAHAMID JCA,
MARY LIM THIAM SUAN JCA
2 JUNE 2016
_________________________
[2017] 1 CIDB-CLR 54
The Appellant had appointed the Respondent to carry out earth works and site
preparation in relation to a housing project. After commencement of works,
four variation orders, two architect instructions (“AIs”) and four extensions of
times (“EOT”) were issued. The second AI issued on 15 March 2010 did not
carry a corresponding EOT. The Respondent claimed that it needed this EOT in
order to renew its insurance coverage. Without such coverage, the Respondent
claimed that it could not continue with the works. Instead of issuing the EOT,
the Respondent claimed that the Superintending Officer (“SO”) unilaterally
and without any reasonable ground, terminated the contract. The Respondent
further claimed that this termination was not made in good faith as it was made
in order to avoid the Appellant’s liability to pay for idling time. It claimed that it
consequently suffered hardship and losses. A claim for a sum of RM2,561,189 as
the balance of payment due together with idling costs was filed. The Appellant
disputed the Respondent’s claim, alleging inter alia, that the Respondent had
failed to complete the project despite the time extensions. The High Court
allowed the Respondent’s claim for damages arising from the alleged unlawful
termination of the contract. The Appellant appealed to the Court of Appeal.
Held, allowing the appeal in part:
(1) It was quite clear from a reading of clause 51 of the conditions of contract
that while the Appellant had a right to determine the contract for any of
the reasons or defaults set out in clause 51(a)(i)–(v), it was obliged to
first of all, through the SO, issue a notice of default. The object of such a
notice was to warn the Respondent of the possibility of drastic action of
determination of contract. At the same time, it afforded the Respondent
an opportunity to remedy the particular default complained of. Once such
a notice had been issued, then the Appellant was entitled to determine
the employment of the Respondent without further notice where the
Respondent either continued in the default or subsequently repeated
the default. In view of the detrimental and sometimes referred to as the
‘draconian’ step as it served to bring the contract to an end, there also had
to be strict compliance of clause 51.
54
Perbadanan Menteri Besar Kelantan v Syarikat Perusahaan Majubina Sdn Bhd
(2) The failure to specify the particular default that the Respondent was said
to be in breach of was a material non-compliance with clause 51. Bearing
in mind that the purpose behind the issuance of the notice was to bring
the particular default to the attention of the Respondent so that it may be
addressed or remedied, or not repeated, it would be quite impossible for
this to take place if the default was not identified to start with. It was not
for the Appellant to say that just because the Respondent may be aware of
the particular default that it was exempted from spelling out the default
in the notice. In as much as the notice was a pre-requisite to the right to
determine the contract, so were the contents of that notice. The notice
requirements were not purely directory, certainly not after appreciating
the intent and circumstances under which such a notice may be issued.
(3) The letters or memos sent by a party which was not the SO, could not
constitute a notice within the meaning of clause 51 that the Appellant
could rely on to cite a continuous or repeated breach. The termination
notice was invalid for non-compliance with clause 51 of the Conditions of
Contract.
(4) The High Court had erred in allowing the claims of the Respondent for:
(a) loss and expense or idling claims; (b) damages for blacklisting; and
(c) interest from the date of decision to date of realization. Concerning
the Respondent’s claim for payment of progress claim No 16, the High
Court had failed to take into consideration that the Respondent’s claim
was inherently improbable and incorrect. As a claim for work done, the
Respondent was required to prove that the work done was indeed carried
out and that such work was of the value claimed in the Statement of Claim.
Since it was undisputed that the Respondent never completed the works,
it could not be entitled to the balance sum of the contract price without
more. Evidence had to be led to prove the value of work done.
(5) Clause 44 provided for a delay related claim. It was not a claim independent
of delay. Before a claim for loss and expense may be properly and validly
raised under clause 44, such loss and expense had to be a direct result
of the delay caused only by the grounds recognised under clause 43(c),
(f) or (i). In the instant case, the High Court was clearly wrong in having
allowed the claims. The evidence quite clearly revealed that none of the
Respondent’s claims were properly within clause 44. Material factors
were not considered, adequately or at all. Such failure was plainly wrong
and warranted appellate intervention. There was also no basis for the
award of damages for the alleged black-listing of the Respondent by the
Government of Kelantan or by the Appellant, without more.
(6) There was no merit to intervene in the High Court judge’s decision that
the termination was invalid. Such decision ought to be affirmed. However,
on the award of damages, the claims for loss and expense or idling costs
by reason of delay under clause 44 had not been proved sufficiently by the
55
Respondent. The High Court judge’s decision on the award of damages,

interests and costs ought to be set aside.
COMMENTARY 1
by Razif Azmi bin Zaki
Adjudicator
Introduction
This case involved a termination of contract and the ensuing claim for
damages. The High Court’s decision that the termination was invalid
was upheld on the basis the contractual notice provisions were not met.
However, the Appellate Court set aside the damages awarded, having
looked into the evidence. Whilst not ground-breaking in legal terms,
this case reminds us of important principles to consider when bringing
or defending a claim.

Terminating a Contract
Taking a decision to terminate is an obviously extremely serious step
that is likely to carry significant commercial consequences and demands
careful compliance with every contractual requirement and condition
precedent.
In issuing the notice of termination, reference must be made to the fact

that the party was seeking to terminate the contract due to the specified
default(s). It is insufficient to claim that the defaulting party was aware
of its own default, or that such knowledge could be inferred in some
way.
The clause relating to notice (in the PWD standard form, and we can
surely assume in similar such clauses in other contracts) is not purely
directory, and the requirements are strict.
Claims for loss and expense and damages

The Court of Appeal reminded the parties that “delay does not per se in
itself result in a claim for loss and expense.”
Whilst it is a fundamental principle of law, it is sometimes easy to forget

that every part of a claim has to be backed up with evidence sufficient to
meet the necessary evidential threshold. This is especially so when the
56
focus of the claim is at risk of being clouded by surrounding issues. All

the elements of a claim have to be proven by the party seeking to assert
its claim, and not just the issues that end up being vigorously challenged
by the other side.
What is also sometimes overlooked is the fact that the Appellate Court
will not hesitate to delve into the evidence put before the lower court to
assess the validity of a claim. In this case, the Court of Appeal pointed out
that the claim amount, which matched exactly the sum left outstanding
under the revised contract, was “inherently improbable and incorrect”.

Terminating a contract
Where a party seeks to terminate pursuant to a specific contractual right,
a prudent approach is advised. In drafting notices preceding a right to
terminate, whether under clause 51 of the PWD Standard Form as in the
present case, or any other similar broad provision such as Clause 15 of
the FIDIC forms of contract, care should be taken to ensure that:
(1) the defaults are identified and fully particularised, with sufficient
detail to enable the receiving party to know exactly what is
alleged;
(2) clear warning is given of the contractual entitlement to terminate

in the event the default is not remedied within the specified
timeframe;
(3) reference is made to the specific clause(s) in the contract relied

upon; and
(4) the notice is issued by the particular person, and in the manner
(relating to service, etc) specified in the contract.
Expressing all this in clear and unambiguous language will ensure the
defaulting party is given the proper—and best—opportunity to remedy
the defaults alleged and to continue to successful completion (which
must surely be the overriding aim of both parties in any such situation).
It further ensures that the terminating party has grounded the

termination securely in the contractual provisions, with specific
references to the relevant clauses acting as a form of checklist. Notice
provisions in contracts are rarely directory or mere guidance, and are
usually found to act as strict conditions precedent to the contractual
right sought.
57
Further advisable steps are to specify how the default is to be remedied,

and how the remedy is ultimately to be assessed. Whilst remedy might
be obvious in the case of straightforward delay such as in this case, it
may not be quite so clear in other situations of default. Spelling out what
needs to be done would further assist the defaulting party to remedy
the default, as well as avoid a situation where the defaulting party seeks
to later allege lack of clarity as to what was required of him.
Finally, where concurrent rights of termination arise, whether

contractually or under common law, it would be prudent to also refer to
those different rights in the notice.
Claims for loss and expense and damages

Parties should take the time and care to go through every element of
the claim, and ensure that evidence is tendered to prove all aspects
of liability and quantum. It is after all better to refer the tribunal to as
much relevant detail as possible, than end up in a situation where the
evidence is found wanting.
Claims for loss and expense can frequently become very complicated,
with multiple heads of costs incurred for different periods including
costs for equipment, labour, fuel, insurance and financing, etc.
A clear presentation of the basis of claim supported by relevant
contemporaneous records and documentation is therefore advised.
As we do not live in a world where everything is meticulously and

accurately documented in a timely manner, attempts should be made
to explain or mitigate any gaps, contradictions or inconsistencies that
invariably arise in evidence.
From the point of view of a party facing a claim, it is advisable to be

prepared to diligently test every part of the case. In situations such as
the one encountered here, the fact that the notice was served by the
PMC (the project management consultant) as opposed to the SO (the
superintending officer for the project) may appear relatively innocuous,
but it turned out to be one of the points the Court of Appeal considered
invalidated the notice.
58
COMMENTARY 2
by Steven Shee
Introduction
The case concerned a contract based on the PWD standard form
203A (Rev 10/83) between the Appellant and the Respondent for the
carrying out of earthworks and site preparation in relation to a housing
project. After commencement of works, four Variation Orders, two
architect instructions and four extensions of times were issued. The
second architect instruction did not carry a corresponding extension of
time. The Respondent claimed that it needed this extension of time to
renew its insurance coverage. Instead of issuing the extension of time
certificate, the Respondent claimed that the Superintending Officer
(“SO”) terminated the contract through letter dated 9 June 2010.
The Respondent subsequently claimed for payment of the balance due

along with idling cost and also that:
(1) the SO had unilaterally and without reasonable ground
terminated the contract;
(2) the termination was not made in good faith; and
(3) it suffered hardship and losses.
The Appellant’s main defences to the Respondent’s claims were:

(a) the Respondent failing to complete the project despite the
extensions of time granted;
(b) the Respondent’s non-compliance with the contractual
requirements, lack of supporting documents and non-
verification by consultants of the claim; and
(c) the Respondent’s claim was premature.
In this case the High Court allowed the Respondent’s claim for damages
and found that clause 54 of the conditions of contract (which required
the Respondent to first refer the matter to arbitration before filing
the present claim) did not apply and the termination was invalid. The
Appellant appealed to the Court of Appeal. The Court of Appeal affirmed
the High Court’s decision in that the termination was invalid and set
aside the High Court’s decision on the award of damages, interests and
costs.
59

The Court of Appeal affirmed the High Court’s decision that the
termination is invalid for non-compliance of clause 51 (which allowed
the Appellant to determine the Respondent’s employment) of the
conditions of contract. It is pertinent to note that the notice of default
specifying a particular default (as required by clause 51 to be issued) is
a pre-requisite to the right to determine a contract in view of it being a
draconian step in bringing a contract to an end.
Finally, whether or not one can succeed in one’s claims will depend
upon proving that work was done and that such work was of the value
claimed in the statement of claim. In this case, since it was undisputed
that the Respondent never completed the works, the Respondent could
not be entitled to the balance sum of the contract. Failure to prove the
value of work done was also detrimental.
On delay related claims under clause 44 of the conditions of contract,

this was not a claim independent of delay. The Court of Appeal held that
the right to claim for direct loss and expense under this clause in the
event of delay does not arise in every instance of delay and delay does
not per se or in itself result in a claim for loss and expense. It should
be noted that before a claim for loss and expense may be properly and
validly raised under clause 44, such loss and expense must be a direct
result of the delay caused only by the recognized grounds under the
clause.
In this instant case aside from the fact that a claim for exemplary
damages must be specifically pleaded, the right to such claim had to be
established. Therefore, it can be seen that for any claims for loss and
expense or idling costs to be successful, it must be proven.

A claimant must be familiar with the requirements of the contract for any
claim. In a claim for loss and expense, the claimant must prove that such
entitlement is within the permissible ambits under the contract and a
direct result therefrom. A claimant has to tender sufficient evidence of
the amounts claimed to succeed. For example, it is important to keep
records of machines taken in and out of the site, workforce at site,
payment vouchers, etc.
Claims for extension of time and loss and expense have to be properly
made within the contractually agreed time frame. This can be done
through notices indicating an intention to claim together with an
estimate of the amount of loss and expense and other requirements
under the relevant provisions like submitting the full substance of the
60
claim. Also claims for extension of time and loss and expense must be
based on the events recognized under the contract and the events of
delay must have materially affected the regular progress of the works.
Contemporaneous records have to be maintained and kept to support
such claims.
In view of the seriousness and consequential impact upon determination

of a contract, the option to determine is to be pursued only as the last
option. If there is no other alternative but to determine a contract, great
care must be taken to ensure that it is made pursuant to the provisions
of the contract for determination and the reasons for determination
must be given. In short there must be strict compliance with the
determination provision.
It follows therefore that upon determination, a joint measurement/

evaluation needs to be carried out to determine the: (i) extent of work
done up to the date of determination of the contract, (ii) defective works,
(iii) outstanding works, (iv) goods, (v) unfixed materials and others.
61
View Esteem Sdn Bhd v Bina Puri Holdings Bhd*

CIVIL APPEAL NO: W–02(C)(A)–1507–09/2015
HAMID SULTAN BIN ABU BACKER JCA, PRASAD SANDOSHAM ABRAHAM JCA,
ASMABI BINTI MOHAMAD JCA
22 AUGUST 2016
_________________________
[2017] 1 CIDB-CLR 62
As a result of a payment dispute the Contractor/Respondent filed an adjudication

claim against the Employer/Appellant. After commencement of the adjudication
process, the Employer applied to challenge s 41 of the Construction Industry
Payment and Adjudication Act 2012 (“CIPAA”) with a view to challenging the
jurisdiction of the Adjudicator. Before the s 41 application was disposed of in
the High Court, the Adjudicator delivered the award. The award was in favour
of the Contractor. The Contractor applied to the High Court for an order to
enforce the award as a judgment of the High Court, pursuant to s 28 of CIPAA.
The Employer applied to set aside or stay the award pursuant to ss 15 and 16 of
CIPAA. The High Court dismissed both the Employer’s applications and allowed
the Contractor’s application. The Employer appealed to the Court of Appeal.
(1) CIPAA 2012 has been formulated to provide summary relief in relation to
construction related claims. It was not the function of the Court to review
the decision of the Adjudicator relating to quantum in detail as the Act
itself provided a mechanism by way of arbitration or litigation to sort out
the final accounts of the parties, wherein the Adjudicator’s award can be
reviewed. It was important for the Courts to take cognisance of the short
title and commentary to the Act, which strictly provides inter alia, that
the Court should for all intents and purposes facilitate regular and timely
payment and ought not to be engaged by dilatory or abusive applications
to oppose the award or to stay the award, as evident also by case laws in
many other jurisdictions.
(2) The award adjudication process under CIPAA is a two-stage process. The
first stage is related to payment claims and payment responses. Parties at
this stage may settle the matter and if the matter is not settled, the dispute
as borne out in the payment claim and response can only be referred to
the Adjudicator. This is statutorily a strict requirement (subject only to s
26) as set out in s 27, thereby making the first stage an important stage in
the adjudication process. The relevant sections for the first stage are ss 5,
6 and 27.
62
View Esteem Sdn Bhd v Bina Puri Holdings Bhd
(3) The second stage is related to the adjudication claim and response. It is a
strict requirement under s 5 of CIPAA that the unpaid party may refer a
dispute arising from a payment claim under s 5. It is a strict requirement
because the law provides for parties to extend the Adjudicator’s
jurisdiction only in writing and in consequence the unpaid party cannot
unilaterally extend the scope of its claim. The non-paying party also
cannot extend the scope of its defence for the Adjudicator’s consideration
without a written agreement between the parties as set out under s 27(2).
The time frame set out in ss 5, 6, 9, 16, etc. (subject to s 26) need to be
strictly complied with, failing which the parties will not be able to benefit
from the statutory rights provided in CIPAA. If any claim or defence has
been left out in the payment claim or in the payment response, it may be
taken up later in the arbitration proceedings if the construction contract
has an arbitration clause, or else during litigation proceedings.
(4) Once the adjudication is triggered, the only way to challenge the
Adjudication Award in Malaysia is to make an application to set aside the
award. There is no provision, unlike the Arbitration Act 2005, to make
separate challenges on the issue of jurisdiction, biasness, qualification
of adjudicator, etc. There cannot be an application as in the instant
case to challenge the jurisdiction of the Adjudicator purportedly under
s 41 of CIPAA. The trial judge ought to have dismissed the purported
s 41 application at limine. There is no jurisdiction for the Court to hear a
purported application under s 41 of CIPAA. The purported s 41 complaint
(if any) could only be raised in an application to set aside the adjudication
award.
(5) In the instant case, the Employer had made a single application to set
aside the adjudicating order as well as sought for stay of the adjudication
decision. Such an application was embarrassing as well as flawed and
ought to have been dismissed at limine. The reason being that s 16
envisages that there is already in existence an application to set aside
the adjudication award. In consequence, a stay application can only be
filed upon having filed an application for setting aside. Further, trial Court
must be extremely slow in granting an application for stay as the purpose
of CIPAA is to ensure that the contractor gets his due immediately.
(6) CIPAA relates to interim payments and not the final accounts between the
parties. The Employer’s complaint (if any) that the stay must be granted
because the contractor is insolvent, etc. may not be a justifiable ground
when an Adjudicator who normally will be an expert in the construction
field and chosen by reputable institution has issued the award for just
payment. Unless there is overwhelming evidence that the contractor will
not be able to complete his contractual obligations as well as meet up
with the financial obligation to the Employer, a stay should not be granted.
Even if a stay is granted, it must be on condition that the money is paid to
Court and/or stakeholders account as the Court deems fit.
63
(7) The trial judge had considered the relevant principles relating to setting
aside as well as stay and had come to the conclusion that the application
must be dismissed. The setting aside and stay application had no merits
and were rightly dismissed by the trial Court. The trial judge was correct
in allowing the enforcement application for the enforcement of the
adjudication award.
_____________________________________
* For the case summary on the High Court decision, see [2016] 1 CIDB-CLR 301 (published in
CIDB Construction Law Report 2015).
COMMENTARY 1
by Darshendev Singh
Partner at Lee Hishammuddin Allen & Gledhill
Chairperson, Young Members Group CIArb Malaysia
Introduction
The Court of Appeal, in dismissing the appeal against the High Court’s
judgment in this case, made the following observations.
(1) Timelines under the CIPAA need to be strictly complied with;

(2) The scope of what the Adjudicator can and cannot rule is dictated
by the matters raised in the Payment Claim and Payment
Response;
(3) The Courts will generally not interfere with an Adjudication
Decision;
(4) The only remedy available in challenging an adjudication is
pursuant to s 15 of CIPAA which deals with setting aside the
Adjudication Decision;
(5) Separate applications ought to be filed in seeking to set aside
and stay the Adjudication Decision, with the former being filed
prior to the latter;
(6) The Courts must be slow in granting stay of Adjudication
Decisions;
(7) CIPAA relates to interim payments and not the final accounts
between the parties.
For comprehensiveness, this decision by the Court of Appeal must be

read with the High Court’s decision.
64

(a) Timelines under CIPAA need to be strictly complied with.
Failing which, one may not be able to benefit from the statutory
rights provided in CIPAA. The exception to this is s 26 of CIPAA
where any non-compliance by the parties with the provisions
of CIPAA whether in respect of time limit, form or content or in
any other respect shall be treated as an irregularity and shall
not invalidate the power of the Adjudicator to adjudicate the
dispute nor nullify the adjudication proceedings or Adjudication
Decision. In the event of non-compliances, the Adjudicator may
(i) set aside either wholly or partly the adjudication proceedings;
(ii) make any order dealing with the adjudication proceedings as
the Adjudicator deems fit; or (iii) allow amendment to be made to
the document produced in the adjudication proceedings.
(b) The scope of what the Adjudicator can and cannot rule is dictated
by the matters raised in the Payment Claim and Payment Response
This is enshrined in s 27(1) of CIPAA. This scope cannot, unilaterally,
be extended by one party. Unless the parties agree in writing
to extend the scope of the Adjudicator’s jurisdiction, claims or
defences left out in the Payment Claim or Payment Response
may have to be taken up in subsequent proceedings between the
parties be it in litigation or arbitration.
(c) The Court will generally not interfere with an Adjudication Decision
The Court will only interfere with an Adjudication Decision where
it is plain that the question the Adjudicator has asked was not the
question referred to him or the manner in which he has gone about
his task is "obviously unfair". It is not the function of the Court
to review the decision of the Adjudicator in detail as the parties
would be able to avail itself of litigation or arbitration to sort out
the final accounts between the parties, wherein the Adjudicator’s
decision can be reviewed. Not all Adjudicators are chosen for their
expertise as lawyers. They come from different disciplines. Due
to time constraints under CIPAA, the Adjudicator is not expected
to act as an arbitrator or a judge but to find an interim solution
which meets the needs of the case. In other words, the need to
have the “right” answer has been subordinated to the need to
have an answer quickly. “In short, in the overwhelming majority
of cases, the proper course for the party who is unsuccessful in an
adjudication under the scheme must be to pay the amount that he
has been ordered to pay by the adjudicator. If he does not accept the
adjudicator’s decision as correct (whether on the facts or in law), he
can take legal or arbitration proceedings in order to establish the
65
true position. To seek to challenge the adjudicator’s decision on the

ground that he has exceeded his jurisdiction or breached the rules
of natural justice (save in the plainest cases) is likely to lead to a
substantial waste of time and expense”.
(d) The only remedy available in challenging an adjudication is

pursuant to s 15 of CIPAA which deals with setting aside of the
Adjudication Decision
Pursuant to s 15, an Adjudication Decision can be set aside on
the grounds that (i) the Adjudication Decision was improperly
procured through fraud or bribery; (ii) there has been a denial of
natural justice; (iii) the Adjudicator has not acted independently
or impartially; or (iv) the Adjudicator has acted in excess of his
jurisdiction. Unlike the Arbitration Act 2005, there is no provision
in CIPAA to make separate challenges on the issue of jurisdiction,
biasness, qualification of Adjudicator etc. In other words, one may
need to wait until the Adjudication Decision is rendered before
one can take up challenges.
(e) Separate applications ought to be filed in seeking to set aside and

stay the Adjudication Decision, with the former being filed prior to
the latter
The reason for this is that s 16 of CIPAA, which deals with staying
the Adjudication Decision, envisages that there is already in
existence an application to set aside the Adjudication Decision. In
this case, a single application was filed to set aside the Adjudication
Decision as well as for a stay of the Adjudication Decision pending
disposal of the setting aside application. The Court of Appeal took
the view that “…such an application is embarrassing as well as
flawed and ought to have been dismissed at limine”.
(f) The Courts must be slow in granting stay of Adjudication Decisions

This is because the purpose of CIPAA is to ensure that the winner
gets his due immediately. “Unless there is overwhelming evidence
that the contractor will not be able to complete his contractual
obligations as well as meet up with the financial obligation to the
Employer, a stay should not be granted. Even if a stay is granted,
it must be on condition that the money is paid to Court and/or
stakeholders account as the Court deem fit”.
66

It is of utmost importance that the timelines under CIPAA are strictly
complied with, failing which there may be adverse consequences.
Payment Claims and Payment Responses ought to be properly drafted

to avoid a situation where matters which were not sufficiently, or at all,
raised in the Payment Claims or Payment Responses, being precluded
from consideration by the Adjudicator.
In applying to stay an Adjudication Decision pending the disposal of an

application to set aside the Adjudication Decision, both the applications
ought to be filed separately (and not in a single application) with the
setting aside application being filed prior to the stay application.
In a situation of a (potential) dispute, it is always advisable to quickly

have a good consultant onboard.
67
COMMENTARY 2
by Prof. Sr Dr. Wan Maimun Wan Abdullah
CQS, FRISM, PPRISM
Director, Khalid Ahmad Architect
Director, Ahmad Zaki Sdn Bhd
Introduction
In brief, the Adjudicator made an award in favour of the contractor, Bina
Puri Holdings Bhd. The Employer, View Esteem Sdn Bhd disagreed and
applied to the Court to set aside the Adjudicator’s decision (pursuant to
s 15 of the Construction Industry Payment and Adjudication Act 2012
(“CIPAA”) and / or a stay of the decision (pursuant to s 16 of CIPAA). The
Court of Appeal upheld the decision of the High Court and dismissed the
appeal with costs.

In dismissing View Esteem’s applications, the Court of Appeal set out
some important principles, and lessons learnt and commentaries from
the case are as follows:
(1) The Court of Appeal was of the view that it is not the function
of the court to review the decision of the Adjudicator relating to
quantum in detail at a hearing for setting aside as CIPAA provides
a mechanism by way of arbitration or litigation to sort out the
final accounts of the parties, wherein the Adjudication’s decision
can be reviewed.
This principle may have repercussions in the industry. Industry

stakeholders have all along understood that the Adjudicator’s
decision is binding but not final (if the dispute does not go to trial
or arbitration, then it is final). Based on normal practise, most
employers concerned recognised the shortfall between their
calculations to that claimed by the other party. The disagreement
is seldom about the dispute itself but rather the quantum.
The principle above may run against the losing party’s intention
for the court to review the Adjudicator’s decision relating to
quantum in detail at the hearing for setting aside.
Since the adjudication process is swift with a concept of pay

first and argue later (usually a rough justice procedure) the Act
provides several mechanisms for the losing party to have the
Adjudicator’s decision reviewed namely:
(a) apply to the court to set aside the adjudication decision

when challenging the adjudicator’s award (s 15);
68
(b) apply for arbitration (s 13);

(c) apply for litigation (s 13);
The grounds for setting aside an adjudication decision by the

courts (s 15) are limited to fraud, bribery, denial of natural
justice, the Adjudicator not acting impartiality or independently
and the Adjudicator acting in excess of jurisdiction. It seems that
most judicial decisions uphold the Adjudicator’s decision. Once
the industry stakeholders begin to realise the limits of s 15, the
trend will be for the losing party to go for a proper recourse and
apply for a fresh hearing to have the dispute re-determined finally
through arbitration or the court (s 13).
(2) CIPAA sets out a two-stage process and the time frame specified
in the sections need to be strictly complied with. Any claim or
defence left out in the payment claim or in the payment response
may only be taken up later should the dispute lead to arbitration
or litigation proceedings.

The two-stage process is as follows:
(a) Stage 1 – Payment claim and Payment response (ss 5 and 6)
This stage allows the parties to the dispute to take a
step back to have a helicopter overview of the dispute in
isolation. It is hoped that at this stage both parties could
settle amicably otherwise the unpaid party may proceed
to issue the Notice of Adjudication to commence the
adjudication.
(b) Stage 2 – Adjudication claim and Adjudication response

(ss 9 and 10)
This stage is for the appointment of an Adjudicator and the
submission of the claim together with supporting documents
by the Claimant and the Respondent’s subsequent response
to the claim together with the Respondent’s supporting
documents.

The principle that sets out that any claim or defence omitted to
be mentioned in the payment claim or payment response could
not be taken up or added during stage 2 of the adjudication claim
and adjudication response, should be a wake-up call to industry
stakeholders to ensure the completeness of their claim and
response at the very onset of stage 1.
69
(3) The Court of Appeal also set out that CIPAA relates to interim
payment and not final accounts between the parties.

This principle is interesting as payment has been defined
in CIPAA 2012 to mean “payment for work done or services
rendered under the express terms of a construction contract”.
This scope for a CIPAA dispute may thus turn ultimately on the
terms used in the contract between the parties and the term
“payment” in the said contract could be inferred to include not
only interim payment but also the final account. In addition this
gives rise to whether it includes variation, loss and expenses due
to prolongation, disruption claim, damages and quantum meruit
claims1 (see Teong Seng Construction v Chuan Lim Construction
(Suit no: OS 711/2007) (High Court, Singapore)), where progress
payment was held to include final payment too).

Hence the words “express terms” in the definition of payment
in CIPAA need to be clarified and may require further judicial
decisions.

In reality, seldom does any party in a construction contract wish to
go after their client for payment. It is almost always the last resort.
However, statistics in the CIPAA Report 2017 showed that from April
2014 till April 2017 there have been 838 registered matters and
decisions released indicated that most of the decisions were in favour
of the Claimant with only approximately slightly more than 10% for the
Respondents2.
This trend may lead to acute awareness on the importance of payment

when due. The main objectives of CIPAA 2012 are to (a) facilitate regular
and timely payment, (b) provide a mechanism for speedy dispute
resolution through adjudication, and (c) provide remedies for the
recovery of payment in the construction industry. Hence after 3 years
since its full enforcement in April 2014, CIPAA and the adjudication
process have taken their course and seem set to be an integral part
of the Malaysian construction industry. However, it is yet to be seen
whether it will be the panacea for the payment problem in the industry.
It should also be noted that the time period for an Adjudicator to

decide is short and limited, and it is most likely that the Adjudicator
will base his decision extensively on the documents submitted. It cannot
be overemphasized the importance of industry stakeholders not only
maintaining proper and contemporaneous records and correspondence
but also being serious in the preparation of their payment response by
70
compiling the important documentation upon receiving any payment

claims that would lead to adjudication. In addition, they need to ensure
adherence to the time frame as provided in the Act, lest these otherwise
proper documentation be considered a non-submission.
_____________________________________
1. Lim, C.F: The Legal Implication of CIPAA – KLRCA Newsletter Jul-Dec 2012 Issue
at pp 9 and 10.
2. This information is produced with the kind permission of KLRCA. For further
details, see KLRCA CIPAA Report 2017 pp 5 and 10
71
Arkitek AAP v Kow Kien Corporation Sdn Bhd

HIGH COURT, IPOH
CIVIL APPEAL NO: 11BNCVC–52–12/2014
CHE MOHD RUZIMA GHAZALI JC
20 JANUARY 2016
_________________________
[2017] 1 CIDB-CLR 72
The Plaintiff/Appellant was appointed by the Defendant/Respondent as

architect, leading consultant and Superintending Officer (“SO”) for a commercial
mall construction project (“the said Project”). The Plaintiff was responsible for
supervising and coordinating the whole project technically before and during
the construction as well as drawing up the Building Plans of the said Project and
submitting the same to the local authorities for their approval. It was agreed
that the Plaintiff’s professional fee for the complete implementation of the said
project would be 1.2% of the total construction cost, to be paid progressively
according to the stages of completion. The Plaintiff prepared the Building Plans
and submitted it to the local authorities for approval. The local authorities
approved the Building Plan but the approval was subject to certain conditions
to be fulfilled before the Defendant could proceed to commence work at the
site for the next stage of the said Project. For certain reasons, the said Project
was put on hold. The Defendant paid the full amount of RM96,000.00 of
the first stage fee to the Plaintiff. The Defendant then paid a further sum of
RM50,000.00 to the Plaintiff for the second stage, five months after the Building
Plans were given approval by the local authority. The Plaintiff’s claim here was
for the balance payment of the second stage. The Magistrate dismissed the
Plaintiff’s claim and held that the payment for the second stage was not due
until all the conditions laid down by the local authority were satisfied. It was
held that the Plaintiff’s claim was premature. The Plaintiff appealed against this
decision.
(1) The Plaintiff had a duty to make sure that the Building Plans got the final
approval. It was the duty of the Plaintiff to coordinate the said Project
as an architect and main consultant. Besides that, being the SO of the
said Project, the Plaintiff had to oversee, manage and supervise the said
Project. The Plaintiff had to be held responsible for any short coming
in the Building Plans submitted for approval. Even though it was the
duty of the engineers to make any amendment to comply with the local
authority’s conditions, the Plaintiff still had to coordinate the amendment
and consequently to make relevant amendment to the Building Plans
prepared by him. The Plaintiff could not run away from his responsibility
of getting the Building Plans approved. That was the only way to ensure
that the said Project could move on to the next stage.
72
COMMENTARY 1
by Datin Grace Xavier
Research Fellow, Faculty of Law, UM
Arbitrator & Mediator
Introduction
This is an appeal against the decision of the learned Magistrate on the
Appellant’s (Plaintiff’s) claim against the Respondent (Defendant) for
payment of the agreed second 10% professional fees due in respect of a
building project. The learned Magistrate dismissed the Appellant’s civil
suit and found in favor of the Respondent and ruled that the payment
of the said 2nd stage was not due until all the conditions laid down by
the local authority were satisfied. Until then, the Appellant’s claim was
considered as premature.
A brief background was that a consultancy payment would be paid

in phases, and would commence from the stage of approval of the
building plans. However, when the plans were submitted, there were
certain conditions imposed by the approving authority. There was a
delay progressing to the second stage. Payment was made for the first
stage and part payment for the second stage. The Plaintiff claimed for
the balance due under the second stage since conditional approval
had been given, with some modifications to be done to the plans. The
Defendant contended that until the final approval was given, subject to
the modifications being done, only then would his liability to pay under
the written contract arise.

It is clear that parties are bound by what documents each have signed.
Furthermore if parties were to rely on a particular document, for
instance, an approval letter from an authority, then again, they are bound
by what is written and not by what may be implied. The contention by
the Defendant that any changes or modifications suggested in a letter
of approval must be complied with before his obligation to pay would
arise, was in line with trite law. The approval letter had laid down some
conditions. However, the Plaintiff seemed to suggest that an approval
is an approval, with or without changes, and therefore he had a right
to be paid since the approval had arrived. This cannot be so and it is
perplexing as to how the Plaintiff could have even put forward such
an argument. A court of law was bound to construe any agreement, or
letter, or document, using the literal rule where the words were clear.
And the court in this case did exactly that. Here there was an approval
73
from a state authority, but there were conditions attached. It was clear,
and the Plaintiff himself agreed, that until the final approval had come
(after the amendments had been submitted) only then could works
commence. The Plaintiff himself had tightened the noose around his
neck by this admission!
Therefore, only when an approval had been given (an unqualified

approval), only then the responsibility of the other party to make the
payment would be triggered. There had to be clear approvals before
the building could commence. The so-called approval letter that had
been received had conditions, and clearly stated that the amendments
had to be made before the Plaintiff could start work at the next stage of
the project. The party in charge of obtaining approvals, in this case the
Plaintiff, was responsible in ensuring that amendments were made, and
the approvals obtained.

From this case, first it is clear that as professionals, the work done
must be scrutinized to ensure that [silly] mistakes do not occur in
the preparation of building plans. Here the plans did not meet the
specifications of the Traffic Impact Assessment Report. This is a mistake
that is not expected of a professional architect, who is meant to know
such specifications. Carelessness is always frowned upon, definitely not
a virtue for professionals!
Secondly, a party that entered into an agreement and assumed the

responsibility to supervise and coordinate the whole project technically,
before and during the construction as well as drawing up the Building
Plans of the said Project and submitting the same to the local authorities
for their approval, has to be aware that this was a huge responsibility.
It cannot pass the responsibility to any other party. Even if that party
had to do the amendments, it, as the responsible party, was bound to
coordinate and ensure that the amendments were carried out. Only the
task could be delegated, not the responsibility.
74
COMMENTARY 2
by Ir. Oon Chee Kheng
Arbitrator, Adjudicator & Mediator
Messrs CK Oon & Co
Introduction
Arkitek AAP (“the Architect”) was appointed by Kow Kien Corporation
Sdn Bhd (“the Developer”) as the architect for a project (“the Project”)
involving the construction of an 18-storey mall. The duties of the
Architect for the Project were not dissimilar to most architects in such
an arrangement, i.e. the Architect would be the leading consultant and
Superintending Officer (“SO”) for the Project. And one of the first duties
of the Architect was to submit building plans for the approval of the
local authority.
It was agreed between the Architect and the Developer that the
professional fees for the complete implementation of the Project would
be 1.2% of total construction cost. The mode of payment for the fees
was agreed upon as being the following stages:
(1) Upon confirmation of contract appointment 10%

(2) Upon Building Plans Approval 10%
(3) Completion of piling works 10%
(4) Progressive claim from lower ground, ground, first, 30%
second, third and fourth floors
(5) Progressive claim from fifth floor to completion 35%
(6) Upon issuing of Certificate of Compliance 5%
and Completion (“CCC”)

The Developer had duly paid to the Architect the first payment, i.e. stage
(1) above. The dispute in this case involved the question whether the
Architect should have been paid the full amount of stage (2) above – it
was not disputed that the Developer had paid to the Architect part of the
amount for stage (2).
It was also not disputed that the Architect had submitted the building
plans that it had prepared to the local authority for approval. The local
authority did approve the building plans, but the approval was not an
absolute approval – it was an approval given with further conditions
to be fulfilled. This meant that the Developer could not proceed
immediately with construction works with such a qualified approval.
75
Indeed the dispute between the two parties centred on the finding
whether the Architect was entitled to be paid the full amount of the
stage (2) agreed fees. That also turned on the proper construction
of the phrase “Upon Building Plans Approval” in the letter signed by
both parties (which was the contract between the parties) and also if
the qualified approval obtained would have reached the stage of “Upon
Building Plans Approval”.
The Architect unsurprisingly insisted that it had fulfilled the condition

for full stage (2) payment to be paid. The Architect contended that the
qualified approval given by the local authority was a standard letter
issued by the local authority. The Architect also insisted that as the
Developer did not ask anyone from the local authority to testify on this,
the Court must draw an adverse inference against the position taken by
the Developer.
The Developer insisted that “approval” meant that the Developer could
proceed to the next stage, i.e. commencement of construction works.
The learned magistrate agreed with the Developer and this was
confirmed by the learned High Court judge upon appeal.

The case has given rise to the question of the wisdom of parties in
departing from the standard Memorandum of Agreement, Conditions
of Engagement, Architects (Scale of Minimum Fees) Rules 2010 as
prescribed by rule 29(1) of the Architect Rules 1996 (amended in
2015). This would also be made more complicated if the legality of such
a practice was challenged: see for example in Weststar Construction Sdn
Bhd v Prisma Athira Architect (Civil Appeal No: WA-12BC-22-12/2016);
this was however not in issue in the instant case under review.
Further, and this applies to all arrangements for stage payments, care
must be put into the definition of stage completion before payment
terms can be triggered. This in practice seems to be where disputes are
crystallised.

This case is a reminder that professionals in construction, be they
architects, engineers, quantity surveyors or others, should not treat too
lightly the very document which confirms their appointment, i.e. the
contract which they have entered into with their clients. It is strongly
recommended that the proper documents be used, and in the case of
architects, that the standard Memorandum of Agreement, Conditions
76
of Engagement, Architects (Scale of Minimum Fees) Rules 2010 as

prescribed by rule 29(1) of the Architect Rules 1996 (amended 2015)
be adopted.
77
Asiaric Contracts Sdn Bhd v CM United Sdn Bhd

HIGH COURT, KUALA LUMPUR
SUIT NO: 22C–58–10/2014
MARY LIM THIAM SUAN J
29 JANUARY 2016
_________________________
[2017] 1 CIDB-CLR 78
The Defendant was the main contractor for a construction project at Jalan
Tun Razak, Kuala Lumpur (“the said project”). The Defendant appointed the
Plaintiff to design, supply and install aluminium formwork in the said project.
The Plaintiff commenced work and had carried out and completed part of its
works when it claimed that it was left with no choice but to suspend work on
5 December 2013. The Plaintiff claimed that the suspension was due to the
following reasons: (i) that its progress of work was frequently interrupted or
delayed by the Defendant’s other works on the project; (ii) that the Defendant
refused to cooperate with the Plaintiff; (iii) that the Defendant had threatened
to impose liquidated and ascertained damages (“LAD”) on the Plaintiff; and (iv)
that the Defendant failed to issue a letter of award for the Plaintiff’s contracted
works despite being repeatedly reminded. The Defendant was accused of being
frequently late in processing the Plaintiff’s progress claims. As at the date of
suspension, the Defendant was said to owe the Plaintiff a sum of RM624,029.88.
The Plaintiff also alleged that the Defendant refused the Plaintiff access to
the site to remove its formwork. Hence, the Plaintiff also claimed a sum of
RM2,542,305.30 as the value of the formwork which the Defendant had used to
complete the project. The Defendant on the other contended that the Plaintiff
was in breach in that its work was defective and required rectification work.
The Defendant further claimed that the Plaintiff had abandoned the work which
had to be completed by a third party, the costs of which the Defendant was now
counterclaiming. The Defendant also counterclaimed for LAD for the Plaintiff’s
late completion of work, relying on a letter of award for this claim. The Plaintiff
argued that the contract was housed in the quotations and letters exchanged
between the parties and not in the letter of award which was never agreed,
finalised or signed. There was no provision for imposition of LAD in the said
quotations and letters. Hence the issues which arose for determination were:
(a) whether the parties were bound by the Plaintiff’s quotation or by the letter
of award as amended and prepared by the Defendant; (b) whether the Plaintiff
had rightfully stopped work on 15 December 2013. If the answer was in the
affirmative, whether the Defendant owed the amount of RM624,029.88 for the
work done. If the answer was in the negative, whether: (a) the Plaintiff was
liable to pay for the rectification and maintenance costs of the formwork to the
Defendant; and (b) the Defendant had a right to claim for LAD; and (c) whether
the Plaintiff had the right to claim for the cost of the formwork equipment
amounting to RM2,542,305.30 due to the denied access.
78
Held, allowing the Plaintiff’s claim in part and dismissing the Defendant’s
counterclaim with costs:
(1) The evidence revealed that the underlying contract between the parties
was as found in the quotations sent by the Plaintiff; and not in the letter
of award which remained very much a draft up till the time the Plaintiff
vacated the project site. That draft had no legal effect.
(2) Although a contract does not take its validity from the mere presence
of signatures but from the establishment of the existence of all the
necessary elements for a valid contract such as an intention to create a
legal relationship, offer and acceptance, subject matter and a value to the
contract; the existence of signatures surely would assist in addressing
that issue. Where there are signatures present, it would be more difficult
to explain away the meaning of the document upon which the signatures
appear. Where the signing is however withheld, as was the case here,
there must be plausible explanations proffered and those explanations
must be carefully examined.
(3) The fact that the parties could continue and could carry out works and
make payment against work done, without the terms in the Form of
Agreement being finalised or while the finalization of the terms continue
albeit protracted; revealed that the Form of Agreement was more in the
nature of a formality. The parties already had all the makings of a valid
contract and that could be found in the quotation and the tacit agreement
of the Defendant through its conduct in allowing the Plaintiff to perform
its obligations under the quotation, and the Defendant in paying for the
Plaintiff’s work against the terms as found in the final quotation issued by
the Plaintiff.
(4) It was clear from clause 3 of the quotation which dealt with payments and
clause 3.6 specifically that the Plaintiff had reserved the right to suspend
or terminate the contract in the event of non-payment by the Defendant.
The Defendant had failed to pay the Plaintiff according to the agreed
terms as found in the quotation. The Defendant had been alerted as to
this non-payment and had been put on notice of the Plaintiff’s intention
to stop work if the Defendant continued to fail to pay the balance of the
progressive claims. There was no explanation as to why the Defendant
had not paid. The failure to pay was a breach of the contractual obligations
which gave the Plaintiff the right to suspend works. Hence, the Plaintiff
was well within its rights and contractual terms to stop work.
(5) The claim for rectification costs was not dependent on the existence of
terms to the effect. It depended on proof of causation and the loss. Here,
there was no evidence that the rectification works were occasioned by the
Plaintiff’s work or defective work. Further, there was no evidence that the
Defendant had expended such sums.
79
(6) As for the question of delay, since the contract was in quotation and there
were no provisions on the matter of LAD, the Defendant had no basis to
make this liquidated claim. In any case, the delay was occasioned by the
Defendant itself. In such circumstances, the Defendant had no right to
impose such terms.
(7) The Plaintiff’s basis and method of calculation of its damages for the
formwork was incorrect and unacceptable. The Plaintiff could not be paid
according to the full costs of the formwork due to two reasons. First, the
Plaintiff’s claim was a claim for breach of contract and not a claim in tort
or a claim founded on the specific tort of conversion. The Plaintiff merely
alleged that it was not allowed access to recover its equipment; and that
a joint inspection had failed to resolve the matter of the recovery of this
equipment. The remedy rightly should be a recovery of the formwork and
related paraphernalia; and not the full costs of the formwork. Second, the
Defendant had used the equipment left behind. This use was only possible
because it was the Plaintiff who in the first place, chose to leave the
formwork to the Defendant to use “out of goodwill”. Hence, the Defendant
only had to pay reasonable rentals for a period of 6 months.
COMMENTARY 1
by A Mu’iz Abdul Razak
Lecturer, School of Law, UiTM Shah Alam
Introduction
The Defendant, as the main contractor, appointed the Plaintiff as the
subcontractor to design, supply and install aluminium formwork for the
former’s project.
Issues arising from the case

The first issue to be determined in this case was whether the
subcontract between the parties arises from the quotations issued by
the Plaintiff or the letter of award prepared by the Defendant as the main
contractor. This issue is central in this case because the determination
of the underlying rights and obligations of the parties depends on the
instrument the parties subscribed to.
The Plaintiff claimed that the contract couldn’t subsist in the letter
of award, as it was not signed on their behalf and the Defendant
had unconditionally accepted the Plaintiff’s terms as stated in the
quotations, which could be deduced when the Defendant confirmed
the design works by the Plaintiff and gave approval to proceed.
80
To identify the underlying contract of which the parties may base their
claim and counterclaim, the Court examined the subsequent actions of
the parties and found that the Plaintiff had carried out the works based
on the quotations and the Defendant implicitly accepted this despite the
fact that the latter’s letter of award remained a draft until the former
commenced works. The Court held that subsequent actions of the
parties reflected this understanding and thus the parties were bound
to the terms and conditions as stated in the quotations and not in the
letter of award.
Reference may be made to the case of Lim Keng Siong v Yeo Ah Tee [1983]
2 MLJ 39, where the Federal Court was of the view that on the evidence
and exhibits, it was the intention of the parties to come to a definite and
complete agreement. The mere fact that the written agreement had to
be drawn up and executed by them did not necessarily mean that there
was no legally binding and enforceable agreement. Further, the Federal
Court agreed that "subject to contract" would mean a mere expression
of the desire of the parties as to the manner in which the transaction
already agreed to, will in fact go through.
The letter of award, in the instant case, which had yet to be drawn up,
fell squarely within what was discussed above as the letter of award
was regarded as only in the nature of formality. The parties intended
to be bound by the quotations because the parties could carry out and
continue works and make payment despite the letter of award being not
yet formalised. The terms of the subcontract had been agreed to by both
of the parties as entrenched in the quotations. The Court in this case
was reluctant to rely on the draft letter of award, which was not agreed
to by both parties, unmistakably when the Plaintiff did not agree to the
terms of the letter of award and further proposed amendments to it.
From the quotations, it was clear that the Plaintiff reserved the right to
suspend or terminate works if the Defendant failed to effect payment,
which lead to the second issue in this case. The Defendant deducted
LAD as alleged from the progress payment claim made to the Plaintiff
because there was an allegation that the latter had delayed in the
completion of the works.
The Court held that the Defendant indeed had failed to make payment
to the Plaintiff according to the agreed terms of the quotations. The
Defendant’s actions were considered as clear breach of the subcontract
and hence entitled the Plaintiff to consequently suspend the works.
With regard to LAD, evidently there was no basis for its imposition
in the quotations. Nothing in the quotations stated anything
related to liquidated sum in the event of delay, hence the Defendant
was not entitled to claim such liquidated sum from the Plaintiff.
81

A contract is meeting of minds of the parties, and if this "meeting
of minds" is lacking, then there would be no contract to begin with,
referring to the letter of award that was not agreed to by both parties.
However, this "meeting of minds" is obvious in the quotations by the
Plaintiff when the parties had subsequently acted based upon it.
The law is clear on the position of the terms of the contract being the
main reference point in determining the rights and obligations of the
parties. Regarding the imposition of LAD, when there are no terms of
the contract indicating such provisions, under whatever label, the Court
will not allow imposition of any liquidated sum. It should be noted at
this juncture that in the present case, the Defendant themselves caused
the delay, hence, even if there were LAD terms, its imposition would not
have been upheld by the Court as it would have been in conflict with
the maxim ex turpi causa non oritur actio, where the Defendant cannot
benefit from its own wrongdoing.

It should be a reminder to all construction industry players to be
mindful of the fact that there is a plethora of building contracts in this
country, which do not have a proper written instrument. This forces
the Court to scrutinize all the minute and detailed correspondence
between the parties to determine what are the terms of the contract. It
is understandable that for a contract to be valid, there is no mandatory
requirement for it to be in one instrument with a signature at the end of
every page; all it need was to satisfy all the elements of contract i.e offer,
acceptance, considerations, certainty etc. However, it would be hugely
helpful to have a clear wording in a proper instrument agreed between
the parties in order to determine what are the rights and obligations to
be executed by all the parties to the contract.
82
COMMENTARY 2
by Ir. Harbans Singh K.S
HSKS Dispute Resolution Chambers
Introduction
This case deals with the common issues encountered in construction
contracts, namely, with respect to the establishment of the very
documents constituting the contract between the parties, the right
of a party consequent to breach of contract on the part of the other,
suspension, termination of the contract, delay damages, etc. It also
examines the methodology of ascertaining the rightful amount due to
an innocent party where it is denied the right to remove its equipment/
materials following its valid termination of the contract.
All these issues were fully ventilated by the parties; these being the
Plaintiff (the subcontractor), and the Defendant (the main contractor),
within the context of a Design and Install contract that had been
prematurely ended by the former due to the latter’s default in not
fulfilling its payment obligations under their contract. The legal issues
arising out of this case have been amply highlighted in the legal
commentary. The instant commentary will thus concentrate merely on
the construction aspects.

The primary lessons that can be learnt by practitioners can be distilled
from the judgment of the learned judge, and can be summarised in
tandem with the following issues:
(1) What constitutes the contract?

It is a common myth among practitioners in the construction
industry, especially those non-legally trained ones, that a
contract can be legally valid only if there is a document signed
by both parties. In practice, this rarely happens especially at the
lower levels of the construction chain starting with contracts
between main and sub-contractors. This is vividly illustrated by
the instant case. The Courts are nevertheless prepared to hold
even a contract by conduct i.e. if one can be shown to exist on
the facts of the case. If there is an exchange of correspondence
between the parties, the courts can infer the existence of a valid
contract provided all the elements of such a contract, inclusive
of an intention to create legal relations, clear offer, unqualified
acceptance, subject matter, certainty of terms, the contract sum/
valid consideration, etc. are proven to exist.
83

The above elements are important for the establishment of a
valid contract, and not merely by the presence of the parties’
signatures on a document, although where signatures are
present, it would be more difficult to explain away the meaning
of the document on which the signatures appear. Where the
signing is withheld, as was the case here, there must be plausible
explanation, and those explanations must be carefully examined
(see Duta Wajar Sdn Bhd v Pasukhas Construction Sdn Bhd [2015]
4 CLJ 281). Accordingly, the unsigned draft letter of award
in the instant case was held not to be a legal contract, but the
quotations sent by the Plaintiff and accepted by the Defendant
was held to be so since the evidence showed that there was an
intention therein to create legal relations.
(2) Subcontractor’s rights following main contractor’s payment

defaults
Here again, it is normally a knee-jerk reaction of many a
contracting party to either slow-down/suspend, or stop work
altogether as soon as the payment claimed is not paid by the
other party in whole, or in part. It is clear that there is no common
law right to slow-down/suspend the works. It must be expressly
stated in the terms of the contract, or can be exercised only after
pursuing statutory adjudication under s 29 of the Construction
Industry Payment and Adjudication Act 2012 (“CIPAA”). In a
similar vein there is no right to stop work unless the contract
expressly so allows, or in its absence, the innocent party can
bring the contract to an end for a repudiatory breach of contract
pursuant to s 40 of the Contracts Act 1950. On the facts of this
case, the Court found that there was indeed an express term in
the contract i.e. the quotations that permitted the Plaintiff to
suspend/stop work in the event of the Defendant’s non-payment.
With regard to the Defendant’s right to impose LAD, the Court

reaffirmed the position in law to the effect that such a right can
only be exercised, if the contract expressly allows, and then only,
strictly in accordance with the same. Since in the instant case the
court ruled that the contract between the parties was contained
in the quotation which had no provisions on the matter of LAD,
the Defendant had no contractual right to make this liquidated
claim. It is submitted that in such case, the Defendant‘s only
option would be to pursue, and prove a common law claim for
special damages, which it did not do in the instant case.
84
(3) Sub-contractor’s claims following stopping work

The primary point for the Court to determine in relation to
this issue was not only in regard to the Plaintiff’s right to claim
costs of the materials/equipment on being denied access by the
Defendant to remove the same from the site, but also the proper
measure to employ for its valuation. Although the Plaintiff
claimed full costs for these materials/equipment and the related
paraphernalia as well as loss of profits, the Court was only
prepared to award a reduced figure on the rate of simple hire
merely for a limited period of time when the Defendant used
these materials/equipment.
The claim for loss of profits was not allowed as the Plaintiff
did not prove the same. As to the Plaintiff’s claim for costs of
the equipment and the related paraphernalia, the measure of
compensation, as well as the final amount awarded by the Court,
was influenced by factors such as the Plaintiff’s claim being
one for breach of contract and not founded on the specific tort
of conversion, the failure of the Plaintiff to make more serious
efforts to inspect and reclaim the materials, etc.

All parties involved in the construction industry, should attempt their
level best to adopt the proposed practices in regard to the following
matters:
(a) Contract Documents

Serious attempts should be made to move away from a
lackadaisical attitude in entering into contracts, towards a more
structured and legal practice of ensuring that proper contract
documents are prepared and formalised before, or soon after
the work commences. Reliance on secondary/incidental
documents such as quotations, letters of intent, unsigned letters
of award, etc. should be avoided. This is especially so since
a “written contract”/ “contract in writing” is evidentially of
immense importance as could be seen from the instant case. Its
significance is further amplified if the parties ultimately end up
in disputes which need a dispute resolution tribunal to decide.
(b) Enforcement of rights following breach/default

The substantive and procedural rights of both parties under a
contract should be expressly stipulated in the contract in clear
and unequivocal language. These should encompass all the
major/common breaches such as, default in payment, delay in
work progress, defects and completion issues, termination, etc.
85
The parties should identify and allocate the risks involved as

well as the procedures to be followed by each side in relation to
these breaches/defaults, plus any capping of the consequential
entitlements e.g. for LAD, loss & expense, etc.
(c) Pursuing claims arising from breaches/defaults

Claimants should carefully, and clearly establish the legal basis
of their particular claim i.e. whether it is “contractual”, or
“extra-contractual”, etc. The claim should be professionally and
accurately drafted and substantiated/proved to the standard of
law required under the circumstances. Last but not least, the
Claimant must show that it has discharged its duty of mitigation.
In a similar vein, it is also incumbent for assessors of such claims
to act fairly, reasonably and professionally to avoid consequential
disputes arising.
86
BM City Realty & Construction Sdn Bhd v
BM City
Merger Realty
Insight (M)&Sdn
Construction Sdn Bhd
Bhd & Another Casev
BM City Realty & Construction Sdn Bhd v Merger

Insight (M) Sdn Bhd & Another Case
ORIGINATING SUMMONS NOs: WA–24C–11–04/2016 &
WA–24C–22–05/2016
LEE SWEE SENG J
23 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 87
The first Originating Summons (“the Setting Aside OS”) was BM City Realty
& Construction Sdn Bhd’s (“BMCRC”) application to set aside the whole of an
Adjudication Decision under s 15 of the Construction Industry Payment and
Adjudication Act 2012 (“CIPAA”). The second OS (“the Enforcement OS”) was
Merger Insight (M) Sdn Bhd’s (“MISB”) application to enforce the Adjudication
Decision under s 28 of CIPAA against BMCRC. BMCRC as Employer under a PAM
Contract 2006 (Without Quantities) had engaged MISB to be the Main Contractor
to carry out a mixed development project in Seberang Perai (“Project”) for a
contract sum of RM104,600,000.00. Disputes arose between the parties with
MISB complaining that it had not been paid on time for 3 Progress Claims. MISB
thus pursued these as payment claims under the statutory adjudication scheme
under CIPAA. BMCRC on the other hand complained of the delay caused by
MISB and terminated the employment of MISB. The Adjudicator allowed MISB’s
claim. BMCRC’s contentions in the present proceedings were as follows : (i) that
the Adjudicator had exceeded his jurisdiction in holding that the 3 Certificates
issued by the Architect were due for payment when under clause 25.4(d) of
the PAM Contract 2006 the payment was deferred until the completion of
works upon determination of the employment of MISB by BMCRC; (ii) that
there was a breach of natural justice when the Adjudicator held that there was
no evidence to prove that a sum of RM1,824,805.60 had been paid by BMCRC
direct to 3 Nominated Sub-contractors (“NSCs”) when in fact it had been paid
and therefore the decision amounted to an unjust enrichment of the Unpaid
Party; (iii) that the Adjudicator in considering the issue of quantum ought to
have exercised his powers under s 25(i) of CIPAA and sought clarification from
the parties whether payment was made to the NSCs; (iv) that the Adjudicator
had acted in excess of jurisdiction in granting costs to the Claimant and the
quantum of the costs; (v) that the Adjudicator had acted in excess of jurisdiction
in his failure to consider the issue of set-off for liquidated and ascertained
damages (“LAD”) claimed by BMCRC; and (vi) that the Adjudicator had failed to
act independently or impartially.
Held, allowing the Enforcement OS and varying the Adjudication Decision

(in relation to the Setting Aside OS) to take into consideration the sum of
RM1,824,805.60 already paid to the NSCs with each party bearing its own costs:
87
(1) The fact that BMCRC was unhappy with the decision of the Adjudicator in
that it said the Adjudicator should have decided that no payments were
due to the Claimant as contractually the parties had agreed under clause
25.4(d) that the BMCRC was not bound to make any payments to MISB,
could not mean that the Adjudicator, having jurisdiction to decide on
the issue, had exceeded his jurisdiction by deciding against BMCRC. The
Adjudicator may have arrived at a wrong interpretation of clause 25.4(d)
and thus arriving at a wrong decision, but that did not mean that he had
exceeded his jurisdiction.
(2) The learned Adjudicator had given cogent and valid reasons for holding
that so much of the Progress Claims as had been certified by the Architect
were due for payments in Interim Certificates No. 15, 16 and 17.
(3) For the scheme of statutory adjudication to work, having in mind the
over-arching purpose of CIPAA, which is to facilitate payments for those
down the chain of construction contracts for work done or services
rendered, contractual terms which would be defeating the purpose of the
Act should be struck down. Otherwise there would be nothing preventing
an Employer under a construction contract to rely on a contractual term
to defer payment upon termination, rightly or wrongly done. That would
have the effect of allowing a party to contract out of CIPAA which would
have the effect of thwarting CIPAA. Parliament does not act in vain and
such a conditional payment provision is void and unenforceable under
CIPAA.
(4) With regard to the issue of payment to the NSCs, this was a matter of
assessment of the evidence before the Adjudicator and was a finding of
fact, which the Court should not intervene, as this was not an appeal.
Further, to properly raise the fact of payment to NSCs in diminution of the
Unpaid Party's claim, the Non-Paying Party must raise it in the Payment
Response under s 6 of CIPAA. Then only would it be an issue that falls
within the jurisdiction of the Adjudicator to decide. As it was not so raised,
the Adjudicator could not decide on the matter. Raising the matter in the
Adjudication Response was too late for the Adjudicator to consider.
(5) Even if there was a failure to take into account of payment made to the
NSCs, it was merely an error of findings of facts/law. Such an error does
not require the Adjudication Decision to be set aside. There will not be
a denial of natural justice if the Adjudicator had addressed all the right
issues even in the wrong way. It is only when the adjudicator has answered
the wrong issues that his decision will be a nullity.
(6) The High Court may make any other order as it thinks fit, and that must
necessarily include an order that would result in a fair and just payment
of the adjudicated amount or so much of it as should be deducted as
there was incontrovertible evidence of payment having been made by the
Respondent direct to the NSCs.
88
BM City
Merger Realty
Insight (M)&Sdn
Bhd & Another Casev
(7) The Adjudicator has the discretion to decide on the quantum of costs by
taking into account of all relevant circumstances including those set out
in Regulation 7 of the Construction Industry Payment & Adjudication
Regulations 2014. Given that the Adjudicator had decided in favour of
MISB, MISB was statutorily entitled to costs and the Adjudicator had the
jurisdiction to determine the quantum of costs on such basis as he thought
fit. Where quantum of costs was concerned, it was something within the
discretion of the Adjudicator unless it can be shown that he had acted on
wrong principles.
(8) BMCRC’s allegation that the Adjudicator acted in excess of his jurisdiction
in failure to consider the issue of set-off for damages was unsubstantiated.
The issue in relation to BMCRC’s alleged set-off for Liquidated and
Ascertained Damages ("LAD") was identified, dealt with and dismissed by
the Adjudicator.
(9) For the Adjudicator to properly consider the issue of LAD claimed as a
set-off, BMCRC should have raised it in its Payment Response under s 6 of
CIPAA. It was not raised as a specific defence of set-off but only raised for
the first time in the Adjudication Response. That simply would not do.
(10) The LAD claim had to first qualify to be a payment claim within the
meaning of “payment” under s 4 of CIPAA and within the meaning of a
“payment claim” under s 5 of CIPAA. Clearly an LAD claim was a damages
claim which would not fit into the definition of a “payment claim” that
was susceptible to adjudication under CIPAA. It was a claim for damages
for breach of contract in failure of the contractor to complete on time and
had to be pursued by way of arbitration or litigation and not adjudication
under CIPAA.
(11) BMCRC did not indicate and substantiate its allegation that the Adjudicator
had not acted independently or impartially. It was merely a bare averment.
An affidavit in support of the ground under s 15(c) of CIPAA must descend
to particulars of failure of the Adjudicator to comply with s 24(a)–(e) of
CIPAA such as the Adjudicator’s failure to disclose a conflict of interest in
the matter before him.
89
COMMENTARY 1
by Wilfred Abraham
Consultant, Zul Rafique & Partners
Introduction
This decision is in respect of a challenge brought by the Respondent in
an adjudication.
The Respondent is BM City Realty & Construction Sdn Bhd (“BMCRC”)

and the Claimant is Merger Insight (M) Sdn Bhd (“MISB”).
The Adjudicator found in favour of MISB and awarded an amount of

RM4,370,808.21 as the claim. Interest at 4.2% was given on the sum
awarded and costs were also given in the sum of RM30,989.00 and legal
costs of RM29,000.00.
The Adjudication Decision was pursuant to a Payment Claim and a

Payment Response filed. The Adjudicator had various issues to decide,
the most important being, whether BMCRC can rely on clause 25.4(d) of
the PAM Form of Contract 2006.
BMCRC applied to set aside the award from the Adjudication Decision
pursuant to section 15 of CIPAA.

The issues before the Court were:
(1) Whether the Adjudicator had exceeded his jurisdiction in

holding that the Payment Claims under the 3 certificates issued
by the Architect were due when under clause 25.4(d) of the PAM
Contract 2006 the payment is deferred until the completion
of Works upon determination of the employment of MISB by
BMCRC; and
(2) Was there a breach of natural justice when the Adjudicator had
held that there was no evidence to prove that a direct payment
in the sum of RM1,824,805.60 had been paid by BMCRC to three
Nominated Subcontractors, when in fact it had been paid, and
therefore the decision amounted to an unjust enrichment of the
unpaid party.
90
BM City
Merger Realty
Insight (M)&Sdn
Bhd & Another Casev
On issue No 1, the Learned Judge held that the provisions of CIPAA as

intended by Parliament indicated there was no jurisdictional error on
the part of the Adjudicator in deciding the issue of the three certificates
of payment, and stated as follows:
“The Adjudicator identified this issue at paragraph 41.3 of the

Adjudication Decision as one of the core issues to be decided by
him i.e. ‘Is the Respondent entitled to rely on clause 25.4(d) of the
PAM Conditions of Contract not to pay on progress claim certified
by its Architect?
The fact that BMCRC as Respondent in the Adjudication is unhappy

with the decision of the Adjudicator in that it said the Adjudicator
should have decided that no payments are due to the Claimant as
contractually the parties have agreed under clause 25.4(d) that
the Employer (Respondent) is not bound to make any payments to
the Main Contractor (Claimant), cannot mean that the Adjudicator,
having jurisdiction to decide on the issue, had exceeded his
jurisdiction by deciding against the Employer BMCRC.
The Adjudicator may have arrived at a wrong interpretation of

clause 25.4(d) and thus arrived at a wrong decision, but that does
not mean that he had exceeded his jurisdiction.
In fact the learned Adjudicator had given his reasons, which in the
opinion of the Court, is both cogent and valid, for holding that so
much of the Progress Claims as have been certified by the Architect,
are due for payments in Interim Certificates No. 15, 16 and 17.
…
Having appreciated the prophylactic properties of CIPAA as

intended by Parliament, the learned Adjudicator was perfectly
entitled to proceed to adjudicate on the 3 Certificates of Payments
filed in the Payment Claim and to make a decision ordering the
amount due to be paid.”
On issue No 2, the Learned Judge held that since this is an assessment

of the evidence, it is a finding of fact and an error in its finding is not a
subject matter for setting aside. The Judge stated as follows:
“The Non-Paying Party, BMCRC, had in its ‘Adjudication Response’

dated 14 January 2016 stated that the sum of RM1,824,805.60
had been paid by the Plaintiff [(‘BMCRC’)] to the Nominated
Sub-Contractors (“NSCs”). It was submitted that this fact and/or
statement had never been disputed, denied nor challenged by the
Unpaid Party, MISB, in the Adjudication Proceedings.
91

BMCRC had again in its Affidavit In Support of the OS [(‘Originating
Summons’)] to set aside the Adjudication Decision, averred that
very same fact supported by the Statutory Declaration made by the
Nominated Sub-Contractors.
This fact, averment and/or statement was never disputed, denied

nor challenged by MISB in its Affidavit affirmed … on 23 May 2016.
Learned counsel for BMCRC submitted that it is an undisputed
fact that BMCRC had paid RM1,824,805.60 to the Nominated Sub-
Contractors.”
The Learned Judge affirmed that the jurisdiction of the Adjudicator is

limited to any matter referred to adjudication by the parties pursuant to
sections 5 and 6 of CIPAA unless extended by an agreement in writing.
“As it was not so raised and as there was no agreement in writing by both
the parties, the Claimant and the Respondent, to extend the jurisdiction
of the Adjudicator, then the Adjudicator cannot proceed to decide on
whether a certain sum ought to be deducted from the sum claimed.
Raising the matter of payment to the Nominated Sub-Contractors by
BMCRC in its Adjudication Response is a tad too late for the Adjudicator
to consider.”
The Learned Judge further affirmed that the Adjudicator had acted
within jurisdiction in awarding costs to MISB under s 18(1) of CIPAA
read with regulation 7 of the Construction Industry Payment &
Adjudication Regulations 2014.
The Learned Judge also had occasion to consider if an amount awarded

as Liquidated and Ascertained Damages (“LAD”) could be a defence to
the Adjudication claim. The Learned Judge held that LAD would not be
a claim within the confines of the Act, in particular, after considering
sections 4 and 5(2) of the Act, which set out in full as follows:
“ ‘Payment’ under s 4 CIPAA is defined as ‘a payment for work done or

services rendered under the express terms of a construction contract.
A ‘payment claim’ under s 5(2)(a) includes the due date for payment
of the amount claimed and (c) a description of the work or services
to which the payment relates.

Clearly an LAD claim is a damages claim which would not fit into
the definition of a ‘payment claim’ that is susceptible to adjudication
under CIPAA. It is undeniably and indisputably a claim for damages
for breach of contract in failure of the contractor to complete on time
by the completion date and it has to be pursued by way of arbitration
or litigation and not an adjudication under CIPAA.”
92
BM City
Merger Realty
Insight (M)&Sdn
Bhd & Another Casev

This decision highlights what previous judgments have always
maintained:
(a) The purpose of the Act is to expeditiously deal with such payment
claims;
(b) An adjudication decision is an interim solution;
(c) Error of law does not go to jurisdiction;
(d) Adjudication decisions generally will be enforced by the Courts;
and
(e) Section 5 sets out the claim and section 6 the response, and the
Adjudicator’s decision is limited to what is contained in these
two documents.

Any party wishing to challenge an adjudication decision should seriously
consider a challenge only if the Adjudicator has gone clearly wrong and
it is a decision which the "law will not countenance". Parties must also
realise that an adjudication decision is a temporary measure and the
Courts will not interfere with an Adjudicator’s finding on the facts.
The Adjudicator’s interpretation of the law can be challenged but as
mentioned above it must be "clearly wrong" or perverse. Thus, if there
is to be a challenge it must be on the issue of the law being totally wrong.
However, in reality, a decision at an adjudication is rarely taken further.
93
COMMENTARY 2
by Sr Dr. Noushad Ali Naseem Ameer Ali
CQS, PPRISM, FRISM, FCIOB, FCIArb, MNZIQS, MRICS
Chartered Quantity Surveyor
Chartered Construction Manager
Past President, Royal Institution of Surveyors, Malaysia
Introduction
BM City Realty & Construction Sdn Bhd (“BMCRC”) engaged Merger
Insight (M) Sdn Bhd (“MISB”) as the main contractor for the
construction of a 23-storey mixed use high-rise building in Seberang
Perai. Disputes arose between the parties after MISB alleged there were
three outstanding payments due from BMCRC.
MISB then commenced adjudication proceedings under the Construction

Industry Payment and Adjudication Act 2012 (“CIPAA”) seeking payment
of the outstanding amounts due. BMCRC accused MISB of causing delays
to the project. On 11 April 2015, BMCRC terminated MISB’s employment.
At the conclusion of the adjudication, the Adjudicator decided in MISB’s
favour and determined that BMCRC had to pay the outstanding claims
due to MISB, with the costs of the adjudication proceedings to be borne
by BMCRC.
BMCRC then initiated Court proceedings and applied to have the

Adjudicator’s decision set aside. MISB also filed a case in Court to have
the decision enforced. Both cases were heard together. BMCRC made
a number of contentions relating to the adjudication proceedings,
including allegations of breaches of natural justice, jurisdictional
challenges, and claims that the Adjudicator had failed to act impartially.
Justice Lee Swee Seng eventually ruled largely in favor of MISB, varying
only some of the Adjudicator’s decisions relating to payments to be
made by BMCRC directly to nominated subcontractors.

This case continues the Malaysian and worldwide trend of Courts
recognizing and supporting the binding nature of adjudication - even
when the Adjudicator may have made an error of fact and possibly law.
It also re-affirms how CIPAA will prevail over contractual provisions
that may conflict with the purpose of CIPAA. In this case, among other
issues, it concerned matters relating to termination.
94
BM City
Merger Realty
Insight (M)&Sdn
Bhd & Another Casev
In attempting to set aside the Adjudicator’s decision, the following key

considerations were raised in the case:
(1) Did the Adjudicator act beyond his jurisdiction in refusing

to decide the dispute according to his interpretation of the
termination clause in the contract between the parties?
(2) Did the termination clause effectively constitute a conditional
payment provision under CIPAA?
(3) Was there a breach of natural justice when the Adjudicator
allegedly incorrectly decided there was no evidence of payments
made directly to the nominated subcontractors by BMCRC?
Jurisdictional challenges
The contract between the parties was formed based on the standard
PAM Contract 2006 (without quantities). The termination provision
in the contract provided that the employer (BMCRC) is not bound to
pay following termination of the contractor’s employment - even
when payment certificates may have been issued but not paid yet. The
contractor’s entitlement under the contract is only determined after a
new replacement contractor has been appointed and the whole works
were completed.
Based on his interpretation of the contract, Adjudicator decided that

the provision for delaying payment following termination as outlined
in the contract amounted to a conditional payment, and that this was
prohibited under the CIPAA. The Adjudicator also decided that this
provision directly conflicted with the purpose of the CIPAA, which was
to facilitate payment down the chain of contracts.
BMCRC argued that the Adjudicator incorrectly interpreted the

provisions of the termination clause, and that by doing so acted beyond
his jurisdiction. Lee Swee Seng J rejected this argument. His Lordship
held that even if the Adjudicator had interpreted this clause wrongly,
this would still not mean he had exceeded his jurisdiction. As long as
the Adjudicator considered the issues and answered the right questions
there cannot be a jurisdictional challenge – even if the Adjudicator
decided wrongly.
Conditional payments
The prohibition on conditional payment provisions, such as "pay when
paid" and "pay if paid" clauses, is a common provision throughout all
jurisdictions that have introduced legislation governing payment and
adjudication. In considering the arguments, his Lordship considered
one of the overriding purposes of CIPAA, which was to facilitate regular
and timely payment in construction contracts. His Lordship considered
95
that such a clause as found in the contract was effectively attempting to

contract out of the requirements of the CIPAA. Courts have the power to
assess contractual provisions and decide if they conflict with the intent
of CIPAA. If such a provision were allowed, there would be nothing
stopping parties from contractually establishing all types of conditional
payment provisions within their contracts.
Breach of natural justice

During the adjudication proceedings, BMCRC claimed that a number of
payments had been made directly to nominated subcontractors engaged
for the project. However, the Adjudicator did not verify and validate this
claim. He considered this was outside his jurisdiction, as it was not raised
earlier in the proceedings. The Adjudicator’s decision was issued based
on the documents available at the time, which provided no evidence
that such payments had been made. BMCRC was required to pay MISB
for money in connection with work by nominated subcontractors.
During the court proceedings it was confirmed that BMCRC’s claim of

payments having been made directly to nominated subcontractors was
in fact correct, and there had been a number of direct payments made.
This meant that the Adjudicator’s decision had in effect unduly enriched
MISB by ordering payment for work that had already been paid for
directly by BMCRC.
BMCRC argued that the Adjudicator’s failure to consider the payments

made directly to nominated subcontractors, was a breach of natural
justice. Although it was acknowledged there was an error in the
finding of fact in this case, his Lordship decided there was no breach of
natural justice. The Adjudicator had merely issued a decision that was
‘temporarily’ binding as the same dispute can always be submitted in
an arbitration for a final and binding determination. The case highlights
how it is crucial for the Adjudicator to address the correct issues and
answer the correct questions - even if they were incorrectly answered.
As long as the correct questions were answered the Adjudicator’s
decision will be upheld.
In this case MISB acknowledged the payments had been received by

the nominated subcontractors, and consented to the amounts being
deducted from the Adjudicator’s decision. It was stressed however, that
if not for the parties granting their consent, the court would have been
unable to vary the Adjudicator’s decision. The Adjudicator’s incorrect
finding of fact was not a valid grounds for appeal under the CIPAA. To
correct such “temporary injustice” the parties could always resort to
arbitration if this were not rectified in subsequent payments.
96
BM City
Merger Realty
Insight (M)&Sdn
Bhd & Another Casev
BMCRC did not attempt to argue that the Adjudicator was not impartial
in delivering his decision.

The case highlights how important it is for Adjudicators to be trained
to ensure they understand important issues such as those relating to
jurisdictional issues and the need to follow a fair process. These include
the need to act in accordance with the rules of natural justice, giving
both parties equal opportunity to present their cases, and establishing
the right questions to be answered. If the Adjudicator decides wrongly,
this does not in itself mean he has exceeded his jurisdiction with the
consequent negative impact on his decision.
In arbitrations, some arbitrators adopt the good practice of holding

what is commonly called a preliminary meeting. At this meeting the
arbitrator establishes with the parties exactly what questions the
arbitrator is expected to answer. Once this is documented, like in an
adjudication, as long as the arbitrator answers the correct questions,
even if wrongly, the arbitrator’s award will be upheld. In some
jurisdictions, some adjudicators (admittedly relatively few), hold an
equivalent meeting sometimes called a "pre-adjudication meeting". At
this meeting the Adjudicator establishes, with the parties, the exact
questions the Adjudicator is to answer. This has the potential benefit of
avoiding jurisdictional challenges associated with answering the wrong
question which can lead to the setting aside of the Adjudicator’s decision.
Of course, if the common practice is not to call for any meeting at all,
and for the adjudication to be conducted entirely through documents
only, the correct questions to be answered may be established by the
Adjudicator through written communication with the parties early in
the process.
Another important issue from a practical industry perspective is for the

parties to appreciate that the provisions of CIPAA can take precedence
over written terms of a construction contract - even if these express
terms of contract have been agreed to and signed by the parties.
Parties should be cautious before adopting termination terms or other
provisions in the contract that may contradict CIPAA. Construction
contracts drafting bodies too should take heed of this advice and should
ensure all clauses in construction contracts are consistent with CIPAA.
The case highlights the importance of using clear and concise contract
documentation. Even commonly used "standard" terms of contract
may not necessarily comply with the requirements of CIPAA. This case
serves to highlight one such provision.
97
Dato' Hew Hoi Lam @ Kew Hoi Lam (practising as

Akitek Supra) v Michigan Properties (M) Sdn Bhd
SUIT NO: 22C–54–11/2015
LEE SWEE SENG J
15 DECEMBER 2016
_________________________
[2017] 1 CIDB-CLR 98
The Plaintiff (who practiced under the name of “Akitek Supra”) and two
other parties entered into a Shareholders’ Agreement (“the agreement”). The
agreement was with respect to the Plaintiff’s fees as Architect and Project
Manager in a development project on a project land (“the Project”). The
Plaintiff and the two parties owned adjacent lots of vacant residential land
and intended to develop the project land into a residential area in a gated and
guarded community. The Plaintiff owned a single inner lot (“Lot 5”) in the
project land, whereas the two parties owned the other 9 lots. Lots 1 to 4 faced
the main road. The Plaintiff and the two parties were also the directors and
shareholders of the Defendant company, which was incorporated to undertake
the said development. Under clause 3 of the agreement, the Plaintiff’s fees for
architectural services was 10% of the total construction costs, which was higher
than the standard fees of 3.75% to 4% paid for such services. The Plaintiff
contended that he was paid higher fees as an inducement for him to consent
to the development of the project land as his Lot No 5 was a strategic and
determinative Lot without which the gated and guarded development would
be impossible. Upon completion of the project, the Plaintiff sued for the balance
of his fees in the sum of RM1,600,324.00. The total construction cost was
RM16,984,190.57. The Defendant disputed that this should be the construction
cost taken for the calculation of the Plaintiff’s fees as he had not supervised the
Nominated Subcontractors (“NSCs”) work of RM6,966,628.64 and that this sum
ought to have been deducted from the construction costs for the calculation of
the Plaintiff’s fees. The Defendant counterclaimed for damages contending that
the Plaintiff did not perform his job as a Project Manager of the project at all
and that further he was negligent in the discharge of his professional duties as
an Architect resulting in losses suffered by the Defendant. These losses were
owing to, inter alia, additional piling works caused by negligent design of the car
porch/ driveway and additional payments to the contractors for fascia capping
arising out of the Plaintiff negligently not providing for it in the drawings.
Held, allowing the Plaintiff’s claim to a lesser extent with costs and the
Defendant’s counterclaim in part:
(1) Parties are at liberty to agree on what should be the fees for the engagement
of the services of an Architect for so long as it is not below the prescribed
minimum fees. Where a higher fees structure is said to have been agreed
98
Dato' Hew Hoi Lam @ Kew Hoi Lam (practising as Akitek Supra) v
Dato' Hew Hoi Lam @ Kew Hoi Lam (practising
Michigan as Akitek
Properties (M) Supra)
Sdn Bhdv
and later that was challenged, the Court was of course entitled to look at
the factual matrix of the case to see the justification for the higher fees.
(2) Clauses 2 and 3 of the Agreement were clear that the Plaintiff was
appointed to be the Architect as well as the Project Manager for the
project. Whatever the Plaintiff was supposed to do as a Project Manager,
was quite distinct and different from his role as an Architect. The role
of the Project Manager was to oversee the entire Project and he was the
main consultant reporting to the client. It was also his role to appoint
and coordinate with all the professionals so as to ensure that they carry
out their respective duties with due care, diligence and professionalism.
Whilst the agreement did not set out or define the scope of the Plaintiff’s
appointment as “Project Manager”, the parties had in mind the expectation
that as a Project Manager the Plaintiff would supervise the work of the
main contractor and subcontractors.
(3) Management of the NSCs went far beyond mere site attendance. The
management started from day one, where the NSCs were identified,
quotations called and evaluated, designs approved, etc. From the evidence,
it was clear that this Project Management work was done by one of the
other two shareholders and not by the Plaintiff.
(4) The fact that one of these other two shareholders admitted that he did
not bring up more expressly with the Plaintiff the issue of the Plaintiff
failing to carry out his role as the Project Manager, was not a waiver of
the scope of appointment to cover work as a “Project Manager” or that
this scope had been deleted by the parties or even that the Defendant was
now estopped from claiming that the fees should be reduced because the
Plaintiff did not do the portion of his work as a Project Manager. In the
instant case, owing to the friendship between the Plaintiff and the other
two shareholders stretching back many years, it would be something that
could not be comfortably raised.
(5) Where a professional Architect would know full well what is expected of
a “Project Manager”, it is assumed that he should know the scope of work
involved and if in doubt, to clear it with the Defendant who appointed
him. It is not for the Defendant to point out to the Plaintiff his failings in
the discharge of his duties as a Project Manager.
(6) Both the requirements of fairness and reasonableness would constrain

the Court to only allow him the claim for his architectural consultancy
fees and not his Project Management fees as by his own admission he did
not carry out this portion of the work; this Court having found that the
Defendant is not estopped from asserting this in their defence. Estoppel
being a creature of equity, it would be grossly inequitable for the Plaintiff
to be paid for what, by his own admission, he did not do and when one of
the other shareholders had to expend time and energy to attend to that
work.
99
(7) There was no ambiguity in clause 3 of the agreement. It was just 10%
of the construction costs. The components of the “construction costs”
was not broken down into the costs paid to the suppliers or contractors
(whether the main contractor or subcontractor or NSCs). “Construction
costs” therefore meant the costs of completing the construction of the
18 residences without any distinction or breakdown of the components
of the costs and who it was paid to. Since it was admitted by one of the
other two shareholders that he himself wanted to manage the NSCs, the
Defendant had no basis to deduct the sum of RM6,966,628.64 from the
construction cost to compute the Plaintiff's 10% fee where architectural
consultancy fees was concerned.
(8) The requirement under the scheme of the contract for the main contractor
was to report direct to the Defendant and the NSCs to report to the main
contractor, was not in any way incompatible with or in contradiction to
the fact that the Plaintiff as Project Manager was to supervise and manage
these relationships to ensure a smooth and safe progress of works.
Whilst the Defendant then was not entitled to have the value of the NSCs’
work deducted from the calculation of the Plaintiff’s fees of 10% of the
construction costs as the Plaintiff’s architectural fees, the Defendant was
nevertheless entitled to deduct from the Plaintiff’s entitlement of his fees,
the Project Management work not done by him.
(9) Where professional services are concerned, it was very subjective when
it came to fees; regard being had to the novelty of the work, the scope
and value of the work, the experience of the professional and the time
within which the work was to be completed. If both the client and the
professional have agreed on the fees, then generally the Court would
not interfere unless it was shown that what was charged for was not for
what was agreed to be done or was not done at all. In the instant case, the
Plaintiff was not involved in managing the NSCs works or that of the main
contractor and not involved in the overall Project Management work, and
considering some shortcomings in the discharge of the Plaintiff’s duties as
an Architect, a 4% of the construction costs was deducted from the 10%
fees. The proportion of 60:40 for architectural fees:project management
fees was reasonable as architectural services required more specialized
skills and only a registered Architect would be able to submit plans for
approval to the local authorities.
(10) Having approved the drawings for the car porches for submission
in 2009, it smacked of bad faith for the Defendant to now say that the
Plaintiff had been negligent when the residential units had long been
completed and sold. Therefore, the Defendant was estopped from denying
it had approved the drawing showing the shorter porch and it would be
unconscionable for the Defendant to now assert negligence against the
Plaintiff for something it had approved and signed off.
100
Michigan as Akitek
Sdn Bhdv
(11) Where a matter was so obtrusively obvious, there was no need for an
expert to be called to refute the fact that the roof fascia had to be provided
for in the drawings, otherwise there would be a gap between the roof
and the top part of the house where the construction ended. This was an
exception to the need to call an expert which was ordinarily required to
disprove what is common practice among members, in this case of the
architectural profession. Against the backdrop of the Plaintiff’s admission
that he did not prepare the drawings for the roof fascia and the damage
suffered which was not unforeseeable in the extra costs in the Variation
Orders for the roof fascia, the Plaintiff had been negligent here and the
damage suffered had been proved.
COMMENTARY 1
by Tan Sri Dato’ Cecil Abraham
Senior Partner at Cecil Abraham & Partners
Austen Pereira
Associate at Cecil Abraham & Partners
Introduction
The recent High Court decision in Dato' Hew Hoi Lam @ Kew Hoi Lam
(practicing as Arkitek Supra) v Michigan Properties (M) Sdn Bhd concerns
the Court’s intervention when interpreting the terms of an agreement
and the standard of care owed by an Architect in discharging his duties.
The Plaintiff, Robert Tan and Dato’ Azizi owned vacant adjacent
residential lots in Ampang Jaya (“project land”). They entered into
a Shareholders’ Agreement (“the agreement”) for the purpose of
developing the project land into a gated and guarded residential
community (“the development”). Following which, Robert Tan and
Dato’ Azizi had the Defendant company incorporated to undertake
the development with the Plaintiff. The agreement was with respect
to the Plaintiff’s fees as both an Architect and Project Manager of the
development. This action was commenced by the Plaintiff to claim from
the Defendant company the balance of his contracted fees. In addition to
that, the Defendant company filed a counterclaim for negligence.
Under clause 3 of the agreement, the Plaintiff’s fees were agreed at 10%
of the total construction costs, which was comparatively higher than the
standard fees of 3.75% to 4% paid for architectural services (“Plaintiff’s
fees”). The main legal issues that arose for determination in the High
Court was: (1) whether the Plaintiff’s fees were reasonable; (2) whether
the Plaintiff’s fees are inclusive of the Plaintiff’s role as both an Architect
and Project Manager and to determine the quantum of remuneration for
each of the roles; and (3) the standard of care required by the Plaintiff to
discharge his duties as an Architect.
101
The High Court in determining the first issue was of the view that parties
are not limited to the scale of prescribed fees under the Architects (Scale
of Minimum Fees) Rules 2010 for the engagement of the services of an
Architect. Parties are at liberty to agree on the fees provided that it is
not below the prescribed minimum fees. However, where a higher fees
structure has been agreed and later challenged, the Court is entitled to
look at the factual matrix surrounding the background of the transaction
to ascertain the justification for the higher fees. The factual matrix
includes all material that was reasonably available to the parties (see
Berjaya Times Square Sdn Bhd (dahulunya sebagai Berjaya Ditan Sdn
Bhd) v M Concept Sdn Bhd [2010] 2 AMR 205) and to be construed at the
date the agreement was made (see The Royal Selangor Gold Club v Anglo-
Oriented (Malaya) Sdn Bhd [1990] 1 CLJ 995). The Court opined that
the Plaintiff’s fees were reasonable in light of the value added benefit
obtained by the Defendant company from acquiring the Plaintiff’s land.
It was further accepted that with a higher fee, the Defendant company
had expected the Plaintiff to perform his duties as an Architect and
Project Manager.
In determining whether the Plaintiff is entitled to the full amount

claimed, the Court had to consider whether the Plaintiff’s fees are
inclusive of his roles as an Architect and Project Manager. If the answer
is in the affirmative, then it must be decided how the fees ought to be
distributed between the two roles.
The judge found that it is apparent on the reading of clauses 2 and 3 of the
agreement that the Plaintiff was appointed as an Architect and Project
Manager of the development even if the Plaintiff was unaware of it. By
reference to the decision in Pride Valley Ltd v Hall & Partners (Contract
Management) [1998] TCC 574, the functions and responsibilities of
an Architect and Project Manager are clearly distinct and different. A
Project Manager’s responsibility would be dependent on the contract
of appointment and if the agreement, as in this case, does not spell out
the scope of his work, then the Court would fall back on the statutory
definition of a Project Manager and infer the same into the agreement.
In addition to that, where there is no ambiguity in the clause, the clause

should be given its natural and ordinary meaning as per the case of
Arnold v Britton [2015] UKSC 36. Therefore, the term “construction
costs” should not be read as drawing a distinction between components
of the costs and who it is paid to.
The judge once again affirmed that where parties have agreed on
the fees to be paid, the Court would not generally interfere unless it
can be seen that what was charged for was not what was agreed or
was not done at all. The facts of this case fall into the latter category.
102
Michigan as Akitek
Sdn Bhdv
As a result of the Plaintiff’s failure to discharge his duties as Project

Manager, the Court held that 4% of the Plaintiff’s fees will be attributed
to his role as a Project Manager and 6% to his role as an Architect. This
is because an Architect required more skills and specialisation. The
Plaintiff is only entitled to 6% of his fees as opposed to the 10% he
would otherwise have been entitled to had he performed his duty as a
Project Manager.
By reference to various decisions, including, Sim & Associates v Tan

Alfred [1994] 3 SLR(R) 169, and Eckersley & Others v Binnie & Others
[1955-95] PNLR 348 which referred to the principle in Bolam v Friern
Hospital Management Committee [1957] 1 WLR. 582, the High Court
agreed that the standard of care of an Architect is that comparable to
other ordinarily competent members of his profession. Making a wrong
decision per se would not amount to negligent conduct (see Sutcliffe v
Thackrah [1974] AC 727). Further, the Architect may delegate his duties
to a representative as in the case of Jameson v Simon (1899) 1 F (Court
of Session) 1211. Essentially the High Court established that as the
Plaintiff “is a professional, he is to be judged by the standards of his fellow
architects to determine whether or not he was negligent as alleged.” The
onus was on the Defendant company to discharge the burden of proving
that the Plaintiff had fallen below the standard of care. Generally, this
is done by calling another Architect to give evidence. However, where
the alleged negligent act is “obtrusively obvious”, expert evidence is not
necessary for the Court to find the Plaintiff negligent.

Based on this recent decision, it appears that the Malaysian Courts
remain steadfast in enforcing the trite principle of party autonomy
and freedom of contract in relation to the fees for the engagement of
an Architect. Nonetheless, if the contract does not expressly define the
role of a party, the Court may take into consideration the intentions and
expectations of the parties at the time the contract was entered into, to
determine the role of the parties and quantum of remuneration if not
clearly apportioned.

It is imperative that parties clearly and expressly define their respective
roles in the contract to prevent any dilution and/or dispute of the
same. It is also equally imperative that when appointing an Architect
for a project and/or training an Architect, to ensure that the appointed
Architect is cognizant of its duty of care and that his actions are to be
judged by the standards of his fellow Architects. This early recognition
will undoubtedly assist all parties in dealing with a Project moving
forward.
103
COMMENTARY 2
by Ir. Oon Chee Kheng
Arbitrator, Adjudicator & Mediator
Messrs CK Oon & Co
Introduction
This is a case which has given rise to a multitude of issues and this
commentary will only comment on a few of them. The facts of the case
were rather convoluted and are briefly stated as follows.
The Plaintiff (“the Architect”) was a practising architect. The Architect

was also the landowner of a piece of land, which, together with other
pieces of land owned by one Robert Tan and Dato’ Azizi, formed the site
of a proposed gated and guarded development project (“the Project”)
comprising twenty semi-detached houses. The development of the
Project was undertaken by the Defendant, Michigan Properties (M) Sdn
Bhd (“the Developer”), a company where the Architect, Robert Tan and
Dato’ Azizi were shareholders and directors.
A shareholders agreement (“the Shareholders Agreement”) was

entered into between the three shareholders. The relevant provisions
of the Shareholders Agreement provided that the Architect would be
appointed as the sole Architect and Project Manager of the Project.
There was also another provision in the Shareholders Agreement
that provided that the fees of the Architect’s would be 10% of the
construction cost.
It may immediately be noticed by many that the Architect’s fees of

10% would be the envy of many practising architects, and the parties
also agreed that the industry’s rate was generally 3.75 – 4.0% of the
total construction cost. And that was where the disputes between the
Architect and the Developer arose which saw a need for their resolution
by way litigation. The Developer contended that the Architect should
not be entitled to claim for the full 10% of the fees since:
(1) he had not carried out his duties as the project manager; and
(2) the Architect had been negligent in carrying out his duties as an
architect which resulted in losses having been suffered by the
Developer.
This case was thus a case of the Architect suing for the balance of his
fees and the Developer counterclaiming for losses incurred due to the
Architect’s alleged negligence, and also disputing the total amount
which the Architect was claiming.
104
Michigan as Akitek
Sdn Bhdv
Justice Lee Swee Seng held that parties to an architect consultancy

contract were at liberty to agree on what should be the fees so long as
it was not below the prescribed minimum fees in the Architects (Scale
of Minimum Fees) Rules 2010. In other words, the fees could be more,
but not less, than the prescribed minimum. The legality of the fees was
thus not in doubt.
The learned judge then went on to examine whether the Architect

was entitled to his claim, or whether the claim should be reduced or
extinguished. The Developer had claimed that the fees were, amongst
others, for the Architect to function both as the architect of the Project
and as the project manager of the Project and it was the latter duty that
the Architect had failed to accomplish, hence the fees claimed should be
reduced. The learned judge found as a matter of fact that the Architect
did not carry out his duties as the project manager (amongst others)
and thus the fees claimed were accordingly reduced by 4%.
Also, the learned judge did not agree that the Developer had proved its
case against the Architect, that is, that the Architect had been negligent
in carrying out his duties as an architect. One of the main reasons for
this was that the Developer had not adduced evidence from another
Architect. In short, there was no expert evidence of any kind to suggest
that the Architect had carried out his works inadequately.

It can be learnt from the case that for an out-of-the-norm arrangement
to be entered into in the construction industry, proper documentation
ought to be prepared. Where parties attempt to work outside established
norms in order for convenience or to save time and costs, this may lead
to unintended consequences.

This case is a reminder that the distinct roles of professionals in a
construction project must be properly appreciated. From the facts of the
case, the learned judge had found that Robert Tan, a Chartered Surveyor
and a Registered Valuer, was the de facto project manager, since he “was
constrained to step in as someone has to supervise the construction
work to ensure that work schedule was complied with, works were
properly done and that claims were correctly made.” Indeed had he not
done so, or had Robert Tan not been trained in quantity surveying and
thus not exposed to the building industry, the Project would have been
in chaos.
The case also illustrates that the job scope of various parties to a building
contract, must be clearly and unambiguously spelt out. Failure will see
105
parties having to settle disputes instead of better spending their time in

more productive endeavours.
Finally, the Architect had based his cause of action on the Shareholders
Agreement, which should strictly be confined to contracting parties’
rights and obligations among themselves as shareholders. The rights
and obligations of the parties in their other capacities as professionals
in a building project should have been contained in another document
specifically prepared for such a purpose viz. the consultancy contract.
106
Daya CMT Sdn Bhd v Yuk Tung Construction Sdn Bhd
Daya CMT Sdn Bhd v

Yuk Tung Construction Sdn Bhd
SUIT NO: 22C–61–12/2015
LEE SWEE SENG J
27 JUNE 2016
_________________________
[2017] 1 CIDB-CLR 107
The subcontractor (Plaintiff) was engaged by the main contractor (Defendant)

in respect of a construction project (“the Project”). The Defendant was employed
by the landowner/developer as the Main Contractor for all the works under the
Project (“the Principal Subcontract Works”). The contract documents for the
Principal Subcontract Works (“Principal Subcontract”) between the Plaintiff as
principal subcontractor and the Defendant as the Main Contractor, consisted of
a Letter of Award and the PWD 203 (Rev 10/83) together with amendments
in Attachment A to the Letter of Award (“the Conditions of Contract”). It was
a term of the Conditions of Contract that the Plaintiff furnish an on-demand
Bank Guarantee (“BG”) in favour of the Defendant for RM13.5 million. By clause
37(c) of the Conditions of Contract, if the Plaintiff committed any breach of
its obligations under the Conditions of Contract, the Defendant could utilize
and make payments out of or deductions from the BG or any part thereof in
accordance with the terms of the Conditions of Contract. The completion date of
the Project was extended by 43 days to 27 December 2014 (“Final Completion
Date”). As there was substantial delay in the Project, the parties entered into a
Supplemental Agreement to allow for sectional completion. A Certificate of Non-
Completion (“CNC”) was issued certifying that the Plaintiff had failed to complete
the Principal Subcontract Works by the Final Completion Date. According to the
Defendant there were slippages in the completion of the Principal Subcontract
Works. There were work stoppages and strikes by the Plaintiff’s subcontractors
and workmen. The Defendant proceeded to give a Notice under clause 51 of
the Conditions of Contract requiring the Plaintiff to remedy the defaults failing
which the Defendant would terminate the Principal Subcontract. Yet, the work
stoppages and strikes continued unabated. The Defendant thus terminated the
Principal Subcontract and proceeded to make a call on the BG. The Plaintiff filed a
Writ and the present application for an injunction to restrain the Defendant from
calling on the BG. The Plaintiff contended that the termination of the Principal
Subcontract was unlawful and that the call on the BG was unconscionable in
the circumstances of the case. The issues arising for determination were: (i)
whether the Defendant’s termination of the Principal Subcontract before the
revised completion of end March 2016 was unconscionable; (ii) whether the
non-approval of the Variation Orders and the Rejection of the Applications
for Extension of Time (“EOT”) was unconscionable in the circumstances; (iii)
whether the Supplemental Agreement had been procured by the Defendant
107
unconscionably for its benefit and that of the Developer when it had no intention
of re-assessing the Plaintiff’s 3 EOT Applications; (iv) whether the Defendant
by virtue of its superior position, also engineered the Plaintiff’s termination
by interfering with the Plaintiff’s administration of the subcontracts between
the Plaintiff and its subcontractors, resulting in various strikes that delayed
the Project; (v) whether the encashment of the BG would unjustly enrich the
Defendant as the amount exceeded the Defendant’s liquidated and ascertained
damages (“LAD”) claim and thus unconscionable; and (vi) whether the balance
of convenience tilted in favour of the Plaintiff or the Defendant.
Held, dismissing the Plaintiff’s application for an injunction with costs:
(1) The BG was an on-demand performance bond. Payment on the

performance bond or BG was only dependent on the terms of the bond or
guarantee and not on proof of default of the underlying contract.
(2) However, between the beneficiary and the party procuring the bond (the
obligor) one was entitled to look at the underlying contract between
them, to see if the beneficiary’s conduct had been unconscionable in the
circumstances surrounding the underlying contract between the parties.
That unconscionability has been regarded as a distinct ground to restrain
a beneficiary from calling on a BG as separate from fraud.
(3) The test to be applied may be summarised as follows: (a) The applicant
must be able to satisfy the Court that he has a “seriously arguable case
that the only realistic inference is that unconscionability has been made
out”; (b) The applicant has to place manifest or strong prima facie case of
the alleged unconscionable conduct and not a bare assertion.
(4) Unconscionability is tantamount to actions that lack bona fides where

there is an element of unfairness or some form of conduct which appears
to be performed in bad faith: “unconscionable conduct” would have to
depend on the facts of each case. This is a question which the Court has
to consider on each occasion where its jurisdiction is invoked. There is
no pre-determined categorization. Mere breaches of the contract, without
more, would not by themselves amount to unconscionability.
(5) Looking at the dispute that had arisen over the different interpretations on
the Supplemental Agreement and the conduct of the parties subsequent
to it, and putting the Plaintiff’s case at its highest, this was a contractual
dispute over the validity of termination of the Principal Subcontract, not
uncommon in a termination of a construction contract. Whilst one may
believe in the rightness and even the righteousness of one’s claim as was
the Plaintiff’s stand and stance here, that did not, in the absence of cogent
evidence, convert the Defendant’s conduct into something unconscionable
altogether.
108
(6) The Consultants had given their reasons for rejecting the EOT Applications.
Whether these were reasonable, would have to be decided at trial. For
the moment, the Court had to ask if the evidence challenging their refusal
to grant any further EOTs showed a prima facie case of unconscionable
conduct on the part of the Defendant.
(7) Whether or not an EOT application should have been granted and if so for
how long, was a matter for trial. At this stage even if an EOT application
had not been considered reasonably or had been rejected unreasonably,
that did not, in the absence of some egregious element, amount to an
unconscionable conduct.
(8) If a party acts within his contractual rights, then his motive is immaterial.
It could hardly be said to be a case where a party with a superior
bargaining power had sought to bully into submission a party with little
or no negotiating power.
(9) The truth as to whether the Defendant had engineered the default and
termination or was it a case of the Plaintiff trying to engineer itself
out of paying its contractual liabilities, was something that can only be
established at trial.
(10) The Plaintiff failed to carry out the Principal Subcontract Works regularly
and diligently. There was substantial delay and increasingly frequent
strikes and work stoppages. The Defendant had lawfully terminated the
Principal Subcontract in accordance with the terms thereof. As at the
termination date, the total amount of losses and damages payable by the
Plaintiff inclusive of LAD exceeded RM54,786,986.38. There was thus a
basis for the Defendant to call on the BG. There was no danger or evidence
of the Defendant unjustly enriching itself.
(11) There must be a strong prima facie case of an unconscionable conduct on

the beneficiary of the BG and only then may a restraining order be issued
to prevent a call on the BG.
(12) The Court was not satisfied that the balance of convenience would tilt or
tip in favour of the Plaintiff such that the injunction to restrain the call on
the BG should be granted.
(13) The Plaintiff had not shown a strong prima case of unconscionable
conduct on the part of the Defendant to justify a restrain on the Defendant
from making a call on the BG or to receive the proceeds from the BG. The
Plaintiff’s case taken at its highest showed a bona fide dispute on the
termination of the Principal Subcontract that would have to go for trial.
(14) Upon the claim herein being dismissed, the Plaintiff sought an Erinford
injunction. It is trite law that the Plaintiff as Applicant must show that
109
should its appeal be successful, it would prove to be nugatory. Generally,

a payment of money cannot render a successful Appellant’s appeal
nugatory because there is nothing sacrosanct, sacred or special of the
money. The subject matter of the appeal was not something that was
irreversible if the injunction was not granted. The Plaintiff had not shown
that if it was successful, the appeal would be nugatory or that there were
special circumstances justifying an Erinford injunction pending appeal.
The Erinford application was thus dismissed.
COMMENTARY 1
by A Mu’iz Abdul Razak
Lecturer, School of Law, UiTM Shah Alam
Introduction
The Defendant, as the main contractor, contracted with the Plaintiff as
the subcontractor, based on the Principal Subcontract which, among
others, provided for the requirement to furnish a bank guarantee in
favour of the Defendant for RM13.5 million. The situation between the
parties turned sour when slippages occurred in the completion of the
works. The Defendant decided to call on the bank guarantee which led
to the Plaintiff applying for an injunction to restrain the call, alleging,
among others, unconscionability.

The main issue to be determined in this case was whether the call on
the bank guarantee by the Defendant was unconscionable in light of the
various allegations made by the Plaintiff.
The Plaintiff claimed that the Defendant’s termination of the Principal

Subcontract before the revised completion date was unconscionable as
the parties were still negotiating hence the Defendant should not have
issued a notice to rectify the breach and subsequently terminate the
contract. The Court reiterated the position of negotiation in the law of
contract in that when the parties are negotiating, there would be offers
and counter-offers and when the negotiations have come to a stalemate,
it would mean that there has been no successful negotiated settlement.
Upon the failure of the contractor to proceed regularly and diligently
with the works, the employer may give notice to rectify the breach and
thereafter terminate the contract. Thus, if the Defendant opted to issue
110
a notice to rectify the breach and to eventually terminate the Principal

Subcontract, such actions cannot be said to be unconscionable.
The Plaintiff further claimed that the non-approval of its Variation

Orders and the rejection of its Extension of Time (“EOT”) applications
were unconscionable and that the Supplemental Agreement was
procured by the Defendant to unconscionably benefit itself while having
no intention of re-assessing the EOT claims. The Court held that based
on the provision of the Supplemental Agreement, the entitlement to the
EOT is something that the Plaintiff would have to prove, and not a given
entitlement. There is nothing unconscionable if an EOT application is
rejected when a contractor fails to provide grounds for the entitlement
and it follows that it is also not unconscionable if an EOT is rejected
when the contractor fails to provide fresh grounds for the reassessment
of the EOT application. Without cogent evidence of unconscionability
in rejecting the EOT, the Court was of the view that there was no strong
prima facie case that had been made out.
It was alleged by the Plaintiff that the Defendant interfered with the
Plaintiff’s administration of the subcontracts between the Plaintiff and
its subcontractors by using the Defendant’s superior position, which
ultimately resulted in delay of the project. The allegations included how
the Defendant had instigated rumours about the Plaintiff’s financial
position. The Court, employing logic and common sense, held that the
probable conclusion was that the downline subcontractors relied heavily
on prompt payment, which meant they would not succumb to rumours
if they had been paid. It was emphasised that the Defendant was helping
the Plaintiff financially by way of their refusal to deduct liquidated and
ascertained damages (“LAD”) from the interim payments to ensure that
the Plaintiff would be able to make payments to its subcontractors and
thus avert the strikes and work stoppages. These circumstances would
not support the contention that the Defendant had acted unconscionably
in calling the bank guarantee.
It was evident in the Principal Subcontract that the Plaintiff should

furnish the Defendant an on-demand bank guarantee and the Defendant
had every contractual right to call upon it if there was a breach of
the Principal Subcontract where the Plaintiff failed to regularly and
diligently proceed with the project. The Court is of the view that if a
bank guarantee is to be challenged every time a construction contract is
terminated, it would negate the main purpose a bank guarantee, i.e. to
be as good as cash, to be released upon a call on the bank in the event
of default and termination of the contract. Hence, the law places a high
standard that must be adhered to when it is sought to prevent a call on
the bank guarantee or to restrain a beneficiary receiving the proceeds
111
of the bank guarantee in that it must clearly be shown that there was
a strong prima facie case of unconscionable conduct on the part of the
beneficiary, i.e. the Defendant.

It should be noted at the outset that the underlying contract between the
parties is the first reference point to establish the rights and obligations
of the parties. The Court in this case echoed this position even with
regard to the call on the bank guarantee. The parties are to look at the
underlying contract between them, to see if the beneficiary’s (in this case
the Defendant’s) conduct has been unconscionable in the circumstances
surrounding the underlying contract between the parties.
The Court acknowledged that there is no simple formula to ascertain

whether a party had acted unconscionably in calling the bank
guarantee. What would constitute unconscionability would ultimately
be dependent on the facts of each case; there is no objective test to be
applied in ascertaining the actions of the parties. However, it is not
entirely without guidance; the Court in this case recognized the fact
that in order for unconscionability to be made out, there must exist an
element of unfairness or some form of conduct which appears to be
performed in bad faith.
Termination of the Principal Subcontract and the subsequent actions

of calling of the bank guarantee by the Defendant as in the present case
would only be held to be unconscionable if the Plaintiff successfully
proved with strong prima facie evidence that such actions were so
reprehensible that it was tainted with bad faith and would cause
unfairness towards the Plaintiff.

It is understood and known to all construction industry players that
delays in the construction works amounts to a fertile ground for dispute.
When there are delays in the works, it would affect the construction
programme, especially so if the delay is with regard to works in a critical
component of the construction programme. This would in turn result
in subsequent delay in the total works and ultimately there would be
a delay in giving vacant possession to the employer. In the event that
this happens, it is well within the rights of the employer to terminate
the contract and call upon the bank guarantee. If, however, the bank
guarantee is called upon, the contractor (in this case the Plaintiff) must
make out a prima facie case of unconscionability in order to restrain
the call or to restrain the beneficiary obtaining the benefit of the bank
guarantee. Contractors are thus encouraged to ensure regular and
diligent compliance with the construction programme so that smooth
112
progress payments may be made, which would guarantee payment flow

towards the downline subcontractors. As implied by the Court in this
case, if they are paid, it is then certain that they would not dump their
tools and leave the site.
113
COMMENTARY 2
by Ow Sau Pin
MRICS, MMIArb
Director, ReevesOw Consulting Sdn Bhd
Introduction
The requirement for an on-demand performance bond is a regular
feature in the construction industry to secure a satisfactory performance
from the Contractor. This case deals primarily with Court deliberations
in an injunction application to restrain a call on a performance bond
based on the ground of unconscionable conduct. The Court further
considered parties’ obligations under the contract and proper contract
administration thereof. The co-existence of an Employer’s remedies in
the form of delay damages and right to terminate a contract arising from
non-excusable delays were also explored.

Mere breaches of contract by Employers are not unconscionable. Courts
are disinclined to intervene in the calling on performance bonds without
seriously arguable grounds.
The overriding obligation requiring a contractor “to proceed regularly

and diligently” is not disengaged even as parties endeavour to resolve
delay ownership and liability.
A recovery programme does not deny an Employer a remedy in the form

of termination until such target completion date beyond the original
completion period (or an extension thereof) has lapsed. Employer’s
right to terminate a contract subsists with, and is not ousted by, a right
to delay damages during a period of non-excusable delay.
Timely and diligent assessment of claims by Contract Administrators

during course of the project will, in retrospect, significantly assist the
Courts in dispelling frivolous or unsubstantiated claims.
Once an assessment for an extension of time claim has been judiciously

set out by the Contract Administrator, the burden of proof lies with the
Contractor to provide fresh and persuasive evidence to further such
claims. An appeal against such assessment without proper evidence will
not attract any merit for further consideration.
Acceptance of a completion date in a recovery programme that is beyond

the original or extended completion date does not preclude an Employer
114
from a remedy to terminate a contract. The remedy to terminate a

contract subsists notwithstanding an Employer’s right to impose delay
damages for non-completion beyond the original completion date or
any extension thereof.

The goodwill of a contracting party in resolving challenges during
the course of a project will contribute in denying an argument of
unconscionable conduct. It is therefore prudent to have records of such
acts to defeat an injunction application which seeks to restrain a call on
a performance bond.
Proper and contemporaneous records on delay ownership will greatly

assist courts/dispute resolution forums in appreciating parties’ liability
in respect of delays. By the same token, any disagreement on delay
ownership should be rebutted and recorded contemporaneously.
Contract Administrators should clearly set out the basis of granting (or
not granting) extension of time in order to allow appreciation of facts
and delay analysis. Failure to logically explain the basis of any grant
or rejection of extension of time claims will only entrench the parties’
positions unnecessarily and induce further discord in the project.
Submission of a recovery programme without any rebuttal of delay

ownership will (by conduct) diminish, if not completely eliminate,
extension of time claims. Contractors who maintain their rightful
entitlement to an extension of time should record their disagreement
and reserve the right to have such disagreement(s) determined at a later
date in accordance with the dispute resolution procedures stipulated in
the contract.
115
Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd &

Another Case
ORIGINATING SUMMONS NOs: 24C–40–11/2015 & 24C–41–12/2015
LEE SWEE SENG J
6 APRIL 2016
_________________________
[2017] 1 CIDB-CLR 116
The Claimant served a payment claim on the Respondent for a sum of

RM4,035,381.87 (i.e. a claim under Payment Certificate No 5 R1 amounting
to RM1,805,866.65 and a claim under Progress Claim No 6 amounting to
RM2,229,515.22) in accordance with s 5 of the Construction Industry Payment
and Adjudication Act 2012 (“CIPAA”). The Claimant claimed for the unpaid works
done under the letter of award dated 8 October 2014 incorporating scope of
works and conditions of appointment and in accordance with s 36(4) of CIPAA.
A notice of adjudication was served on the Respondent referring the above
mentioned payment claims for adjudication. The Claimant filed its adjudication
claim and the Respondent filed its adjudication response disputing the whole of
the adjudication claim. The Adjudicator in his decision allowed the Claimant’s
claim under Payment Certificate No 5 R1 with an amount of RM1,805,866.65
but dismissed the payment claim under Progress Claim No 6 as the payment
claim was held to be premature. The Adjudicator also awarded interest at the
simple interest of 4.2% per annum on the adjudicated sum from 23 April 2015
until payment. Pursuant to s 18(1) of CIPAA, the cost shall follow the event
and so the Adjudicator decided that the Respondent shall bear 100% of the
costs of the adjudication proceedings which included the sum of RM43,053.06,
being the Adjudicator’s fees, RM9,127.26 being Kuala Lumpur Regional Centre
for Arbitration (“KLRCA”) fees (including GST) and RM55,500 being party
and party costs. Two applications arose from this decision. The first being the
“enforcement application” where the Claimant (in the adjudication proceedings)
sought to enforce the Adjudicator’s decision against the Respondent (in the
adjudication proceedings). The second was the “setting aside application”,
where the Respondent (in the adjudication proceedings) sought to set aside the
Adjudicator’s decision. It was argued, inter alia, that the Adjudicator was late by
three days in making his adjudication decision and as such the whole decision
was void. The payment for the Goods and Services Tax (“GST”) came on the last
day set for the making of the adjudication decision. The Adjudicator released
his decision to the parties after he was informed formally by the KLRCA that
they had received the cheque from the Respondent for the outstanding taxes
payable by the Respondent. The Respondent contended that the Adjudicator
had no authority to withhold the release of the decision on account of the GST
of the KLRCA not having been paid before the decision was made. It was further
contended that as the contract had been terminated by the Respondent, no
116
Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd & Another Case
cause of action had arisen on the payment claim in question and the Adjudicator
should have dismissed the payment claim. It was also submitted that there was
a breach of natural justice when the Adjudicator granted interest when there
was no submission made on it by the parties though the Claimant had claimed
for it.
Held, dismissing the Respondent’s application to set aside the adjudication

decision and allowing the Claimant’s application to enforce the adjudication
decision with costs:
(1) It was clear from the agreed terms of appointment of the Adjudicator that
the parties had agreed to the Adjudicator withholding the service/delivery
of his decision until all the outstanding fees and expenses, including any
taxes as may be imposed by the Government, had been fully settled. This
was also covered within the ‘further time’ which had been agreed by the
parties to be accorded to the Adjudicator for deciding the dispute and
delivering his decision, pursuant to s 12(2)(c) of CIPAA.
(2) The KLRCA as the adjudication authority was clearly empowered under
s 32(b) to determine the standard terms of appointment of an Adjudicator
and fees for the services of an Adjudicator and under s 32(d) any
functions as may be required for the efficient conduct of adjudication
under the Act. It cannot be argued that since the Act under s 19(3) does
not expressly refer to non-payment of KLRCA’s fees, expenses and tax as
a ground for withholding the release of the Adjudicator’s decision, then
the Adjudication Rules and Procedure that empowers the Adjudicator to
do so is null and void as in going beyond the powers conferred by the Act.
(3) The CIPAA did not prohibit the making of payment of KLRCA’s fees,
expenses and taxes as a condition precedent to the release of an
Adjudicator’s decision and such a condition as had been introduced by
the rules and the Schedule to the rules was in tandem with the function of
KLRCA as the adjudication authority under CIPAA.
(4) The adjudication decision was delivered within time and released to the
parties soon after confirmation that the GST of the adjudication authority
KLRCA had been paid which was consistent and in compliance with the
KLRCA Standard Terms of Appointment of the Adjudicator as provided
for under Schedule II of the KLRCA Adjudication Rules and Procedure
contractually agreed to by the parties when receiving the notice of
acceptance of the appointment to act as Adjudicator in Form 6. The
adjudication decision was thus validly made, delivered and released to
the parties.
(5) From the rationale and purpose perspective of CIPAA, there was no good
reason to exclude its application once the construction contract had been
terminated. Under our CIPAA, an adjudication was premised on there
being a “payment claim”.
117
(6) There was nothing improper and much less a breach of the rules of
natural justice for the Adjudicator to have referred to Maybank’s webpage
(www.maybank2u.com.my) for the Maybank’s base lending rate which
was 3.20% with effect from 2 January 2015.
(7) The Adjudicator held that interest stated in the PAM Building Contract
shall take precedence being a binding contract between the contracting
parties and therefore a simple interest of 4.2% per annum on yearly
rest was applied on the sum of RM1,805,866.65 from the date payment
certificate No 5R1 became due on 23 April 2015. In arriving at his decision
on interest to be awarded, the Adjudicator could not be said to have acted
in breach of the rules of natural justice.
COMMENTARY 1
by Datuk Professor Sundra Rajoo
Director
Kuala Lumpur Regional Centre for Arbitration
Introduction
This case was a consolidated hearing of the Claimant’s application for
the enforcement of the adjudication decision and the Respondent’s
application for setting aside of the adjudication decision.
Econpile (M) Sdn Bhd (“the Claimant”) served a payment claim to IRDK
Ventures Sdn Bhd (“the Respondent”) in accordance with s 5 of the
Construction Industry Payment and Adjudication Act 2012 (“CIPAA”)
claiming for unpaid works done under the letter of award incorporating
scope of works and conditions of appointment and in accordance with
s 36(4) of the CIPAA.
The Adjudicator deposited his decision (“the decision”) on 30 October

2015 to the Kuala Lumpur Regional Centre for Arbitration (“KLRCA”)
and this was released to the parties on 2 November 2015.
The Respondent’s challenge to set aside the decision was based on 3

grounds: (1) the decision was void since the Adjudicator was late by 3
days in making his adjudication decision; (2) the contract having been
terminated by the Respondent, it was not be bound to make further
payment to the Claimant until a final account was determined upon
completion of the works; and (3) there was a breach of natural justice
when the Adjudicator granted interest when there was no submission
made on it by the parties though the Claimant had claimed for it.
118
The learned judge dismissed the Respondent’s application to set aside

the adjudication decision and correspondingly allowed the Claimant’s
application to enforce the adjudication decision.

Non-payment of fees by a party entitled the Adjudicator to withhold the
release of his decision
The judge held that it was clear from the agreed terms of appointment of
Adjudicator that the parties had agreed to the Adjudicator withholding
the service/delivery of his decision until all outstanding fees and
expenses, including any taxes as may be imposed by the Government,
had been fully settled. The Adjudicator had deposited his decision with
the Director of the KLRCA on 30 October 2015 and the only reason for
withholding the decision was because of the Respondent’s late payment
of the outstanding GST to the KLRCA. Hence, the Adjudicator had
rightfully withheld the release of his decision to the parties even though
the release was late for 3 days (2 November 2015) from the agreed date
(30 October 2015).
The Adjudicator has jurisdiction to decide on the payment claims even

when the contract has been terminated
The Respondent’s counsel raised the argument that CIPAA only
applied to existing construction contracts and the Adjudicator had no
jurisdiction to decide on this case as the Respondent had terminated
the contract.
However, a jurisdictional challenge will not disable the Adjudicator’s

discretion to proceed and complete the adjudication proceedings
without prejudice to the rights of any party to apply to set aside the
adjudication decision under s 15 or to oppose the application to enforce
the adjudication decision under subsection 28(1). Further, the judge
stated “… just because there is no express provision in the CIPAA to
say that it is applicable in cases where the construction contract has
been terminated does not mean that the CIPAA is inapplicable when the
contract has been terminated.”
The definition of “conditional payment” under section 35 is not exhaustive

The Respondent’s counsel stated that the definition of “conditional
payment” under s 35 was limited to the definitions given under s 35(2)
(a) and (b). However, Justice Lee Swee Seng took a more expansive
interpretation that would accord with the purpose of CIPAA. Since
Parliament had chosen to state a general principle in s 35(1) and had
couched it to be all encompassing as in the use of the expression “Any
conditional payment provision…”, it was for the court to determine on
a case-by-case basis as to whether a conditional payment term would
defeat the underlying purpose of CIPAA.
119
A condition like clause 25.4(d) of PAM has the effect, upon the
termination of the contract, of postponing payment due until the final
accounts are concluded and the works completed and that would be
defeating the purpose of CIPAA. Therefore such a clause is void and
unenforceable and the Adjudicator may disregard it altogether.
The Adjudicator is allowed to award interest on the adjudicated sum

Pursuant to s 25(o) of CIPAA, the Adjudicator in this case had properly
exercised his power under s 25(o) to award financing costs and interest.
Given that both parties were invited to file their written submissions,
it was not for the Respondent to dispute the Adjudicator’s award of
interest if the Respondent had failed to address the issue of interest
payable. It follows that if one party has argued a particular point and the
other party does not address the particular point raised by the opposing
party, there is no breach of the rules of natural justice in relation thereto.

With respect, this case does not really create any new case precedent.
In light of the principles above, it is clear that the courts will strive to
promote the purpose of CIPAA, namely to provide cash flows for the
unpaid contractors/parties in construction disputes. Furthermore,
parties are reminded that jurisdictional challenges and the substantive
merits of the case are two separate matters. The mere fact that there has
been a challenge against the Adjudicator’s jurisdiction is insufficient to
stall proceedings.
120
COMMENTARY 2
by Ir. Lai Sze Ching
Introduction
Econpile (M) Sdn Bhd (“Claimant”) served a Payment Claim on IRDK
Ventures Sdn Bhd (“Respondent”) for a sum of RM4,035,381.87 for the
unpaid Payment Certificate ("PC5R1") and Progress Claim No 6 ("PC 6").
For PC5R1, the Respondent argued that as the Claimant’s employment

under the contract had been terminated by the Architect in accordance
with clause 25.0 of the PAM Building Contract 2006 (“PAM Contract”),
therefore pursuant to clause 25.4(d), the Respondent was not bound
to make any further payment, including payment which had been
certified but not yet paid. With respect to PC 6, the Respondent refuted
the Payment Claim as payment recommendation from the Architect
was still pending owing to the Claimant’s failure to make the required
submissions to the Architect for the Architect’s proper assessment,
valuation and recommendation.
The Adjudicator decided that the Claimant was entitled to be paid for the
amount certified in PC5R1 but dismissed PC 6 on the ground that it was
premature. Thereafter the Claimant applied to the Court for an order to
enforce the Adjudication Decision while the Respondent applied to the
Court to set aside the Adjudication Decision.
The Court agreed with the Adjudicator and upheld the Adjudication
Decision.

In this case, the Court was required to determine, among others, two
important legal issues:
(1) Whether the Adjudicator had jurisdiction to decide on the
Payment Claim when the Contract had been terminated?
(2) Whether the Respondent, pursuant to clause 25.4(d) of the
Contract, was obliged to make payment for the Payment
Certificates validly issued but not yet paid?
(a) Adjudication survived termination of the Contract

The Respondent argued that the whole scheme of CIPAA was
premised upon there being in existence a valid contract that had
not been terminated. Therefore once a construction contract
121
had been terminated, adjudication was no longer available and

parties would have to proceed with arbitration or litigation to
resolve pending claims.

The court disagreed with this argument and opined:
“However, just because there is no express provision in the CIPAA
to say that it is applicable in cases where the construction contract
has been terminated does not mean that the CIPAA is inapplicable
when the contract has been terminated. An argument from silence
is a dangerous thing to do, whether it be in the interpretation of
statute or of sacred text. If the Legislature had wanted the CIPAA
to cease to apply upon the termination of the construction
contract, it could easily ha[ve] stated so. Section 3 is on “non-
application” of the CIPAA and it could have been inserted that
the CIPAA does not apply once the construction contract has
been terminated.”

In addition the court held that s 35 of CIPAA prohibits conditional
payment in that any conditional provision in a construction contract
in relation to payment under the construction contract is void. This
provision appears to be in favour of CIPAA applying even though the
construction contract has been terminated. The Court, by referring to
the explanatory statement to the Bill of Construction Industry Payment
and Adjudication Act 2012, emphasized the object of CIPAA, i.e. it
“prohibits conditional payment terms that inhibit cash flow”. The Act
also “seeks to provide remedies for the recovery of payment upon the
conclusion of adjudication”.
In this case the Court had taken a robust approach and held that
adjudication survived termination of the contract. To decide otherwise
would “skirt the application of the CIPAA at a time when it is needed
most by the claimant for survival when without the cash flow for work
done, it would be suffocating and the claimant may have to slow down,
suspend or even stop work altogether”. Therefore the Court had decided
clearly that the non-paying party is unable to avoid the obligation to
make payment for the work done by the unpaid party by relying on
frivolous grounds to terminate the contract.
(b) Enforceability of clause 25.4(d)

Clause 25.4(d) of the PAM Contract provides that in the event that
the employment of the Contractor is determined “the Employer
shall not be bound by any provision in the Contract to make any
further payment to the Contractor, including payments which
have been certified but not yet paid when the employment of the
Contractor was determined”.

122
The Court after analyzing the provisions in s 35 of CIPAA on the

prohibition of conditional payment, decided to adopt a “more expansive
interpretation that would accord with the purpose of the CIPAA”. In this
case, clause 25.4(d) had the effect, upon the termination of the contract,
of postponing payment due until the final accounts are concluded and
the works completed and that would be defeating the purpose of CIPAA.
Therefore such a clause was void and unenforceable as it contravened
s 35.

Since the implementation of adjudication proceedings in the
construction industry, the court has been very clear on the overarching
objective of CIPAA, i.e. to facilitate regular and timely payment and
to provide remedies for the recovery of payment. The Court has in
many cases emphasized on this and has adopted the approach to
support this objective. In order to avoid an unfavourable adjudication
decision against them when an unpaid party initiates an adjudication
proceeding, it has become more common lately for the non-paying party
to terminate a construction contract, as by doing this, it’s believed that
it would have the effect of preempting adjudication and with that the
need to make payments forthwith upon the execution of the decision.
The Court will not tolerate such acts which will thwart the overarching
purpose of CIPAA.
In addition any attempt to stipulate contractual provisions which have

the effect of avoiding payments when they are due, will be scrutinized
by the Court carefully. The Court will adopt an expansive interpretation
of s 35 where the payment is conditional and will not hesitate to strike
down such provisions.
This decision is welcomed by Contractors and those down the

construction chain as it has resolved an uncertainty with regard to
some contractual provisions that may have the effect of frustrating
the implementation of CIPAA. Otherwise there would be nothing
preventing an Employer under a construction contract, be it a Standard
Form of Contract like the PAM Contract for example, or otherwise, to
rely on a contractual term to defer payment upon termination.
Of course, any wrongful termination would ultimately result in damages

being paid, but for some Employers, for so long as their current cash
flow is not adversely affected, they may delay payment indefinitely. This
would have the same effect as allowing a party to contract out of CIPAA
which would result in thwarting CIPAA and the mischief that CIPAA was
intended to address. With this decision, it is clear that the Employers
must comply with their contractual obligations to pay for the work done
123
by the Contractors. Any possibility to contract out of CIPAA will not be

accepted by the Court. In the long run this will improve the construction
industry specifically and the nation’s economy generally.

Employers are advised to take note of the court’s firm attitude to
support the objective of CIPAA and to ensure punctual payment to their
Contractors when payments are due. Any attempt to contract out of
CIPAA and avoid making payment to the Contractors will not be accepted
by the court. The Employers must also ensure that they have sufficient
cash flow and finances before launching any construction projects.
124
Econpile (M) Sdn Bhd v IRDK Ventures Sdn Bhd

ORIGINATING SUMMONS NO: 24C–40–11/2015 (NO. 2)
LEE SWEE SENG J
13 JUNE 2016
_________________________
[2017] 1 CIDB-CLR 125
The Plaintiff here (“Econpile”) had applied successfully for enforcement of

an Adjudication Decision in its favour against the Defendant (“IRDK”) (“the
enforcement action”) under s 28 of the Construction Industry Payment and
Adjudication Act 2012 (“CIPAA”). Conversely IRDK’s application for setting
aside of the said Adjudication Decision (“setting aside application”) had been
dismissed. Econpile served on IRDK a s 218 Companies Act 1965 (“the CA”)
notice to wind-up IRDK on ground of its inability to pay its judgment debt.
IRDK then filed the present application for stay of execution of the judgment
of the Adjudicated Sum entered pursuant to the enforcement action pending
IRDK’s appeal against the decisions in the enforcement action and the setting
aside action. IRDK obtained an interim stay on the grounds that they needed
time to raise the judgment sum of about RM1.9 million. The main grounds of
the application for stay of execution were: (i) that IRDK would face difficulty
in pursuing its appeal should it be wound up; and (ii) that payment of the
judgment sum would unfairly prejudice IRDK’s business. The issue arising for
determination was whether IRDK’s difficulty in pursuing its appeal, should it be
wound up, was a special circumstance justifying a stay.
Held, dismissing the application for stay of execution with costs:
(1) An appeal does not act as a stay of execution of a judgment obtained. An

Appellant in exercising its statutory right of appeal, may apply for a stay
of execution of a judgment entered against it, if it can be shown that there
are special circumstances justifying a stay. The Court has a discretion,
exercised in accordance with established legal principles, whether or
not to grant a stay and subject to whether the grant of a stay should be
conditional or unconditional.
(2) If previously some doubts might have arisen as to whether the test
of nugatoriness has superseded the test of special circumstances as
propounded by the Court of Appeal in See Teow Guan & Ors v Kian Joo
Holdings Sdn Bhd & Ors [1995] 3 MLJ 598, that has been put to rest by
the Federal Court in Kosma Palm Oil Mill Sdn Bhd v Koperasi Serbausaha
Makmur [2004] 1 MLJ 257. What may amount to “special circumstances”
is not exhaustive and its categories are never closed.
125
(3) Being an adjudicated amount, following the new paradigm introduced by

statutory adjudication under CIPAA, the Respondent should pay first and
argue later. There should not even be a need for the Claimant to have to
first register the Adjudication Decision as a Judgment of the Court before
the Respondent was obliged to pay.
(4) The law on s 218(1)(e) and (2)(a) of the CA is pretty settled. Once a debtor
does not or neglects to pay the demanded debt or to secure or compound
for the debt to the creditor’s satisfaction within three weeks of the service
of the notice, the debtor company is deemed to be unable pay its debts.
The creditor is then entitled to present a petition to wind up the debtor
company under s 218(1)(e) of the CA. The proper exercise of that right
cannot amount to abuse of court process.
(5) If IRDK had a genuine complaint in that the winding-up Petition should not
have been presented, IRDK should have applied to the Winding-up Court
for a fortuna injunction to restrain the Petition from being presented or if
it had been presented, to restrain further proceedings in the Winding-up
Petition.
(6) Econpile was a wholly-owned subsidiary of a listed company in the

Malaysian Stock Exchange and there was no evidence to suggest that it
was not in a sound financial position to be able to pay back should IRDK
succeed on appeal. The judgment was a money judgment and there was
no subject-matter of the action that would be destroyed. IRDK could not
be said of being deprived of the means of prosecuting the appeal as it
could always persuade the Winding-up Court that it had the means to pay
and that it was not insolvent. If there were difficulties, these difficulties
could be avoided by paying the judgment sum.
(7) The appeal was buttressed on the lack of jurisdiction of the Adjudicator.
However, that did not lift the appeal to a higher pedestal nor did that
constitute a special circumstance merely because a jurisdictional point
was being canvassed. It was no different from saying that the Appellant
had a meritorious ground of appeal. The merits of the appeal were not a
relevant consideration at this stage of a stay application.
(8) Whatever may be the natural consequences of being wound-up and with
it the impediment, though not insurmountable, of proceeding with its
appeal already filed, these could not in the circumstances of the case, be
special circumstances, justifying a stay of the monetary judgment.
(9) The fact that IRDK had difficulty raising the judgment sum and had to call
a third party to come to its aid were clear indications that it had a serious
cash flow problem. Prejudice here must not be considered solely from the
perspective of the Judgment Debtor but also from the perspective of the
Judgment Creditor. There was prejudice that Econpile will suffer and have
126
to continue to suffer because it had been deprived of dear monies due to

it in an Adjudication Decision that had now crystallized to be a Judgment
debt.
(10) An application to stay the execution of a Judgment that has proceeded

from an Adjudication Decision must be subject to a closer and stricter
scrutiny than an application to stay an Adjudication Decision pending the
hearing of an application to set aside the Adjudication Decision. In the
case of the latter, the Court would be more inclined to grant a stay where
the requirements of s 16 of CIPAA are met.
(11) About the only special circumstance in the context of justifying a stay of
execution of such a judgment would be when there was cogent evidence
pointing to a reasonable probability that the successful Claimant might
not be in a position to pay back the judgment sum should the Respondent
in the adjudication succeed on appeal or that the Claimant was already in
liquidation. Here there was no trace of evidence pointing in that direction.
COMMENTARY 1
by Datuk Professor Sundra Rajoo
Director
Introduction
In the consolidated action of Econpile v IRDK (No 1) before the High Court,
Econpile had obtained judgment to enforce the Adjudication Decision in
its favour (hereinafter “the Judgment”). Econpile subsequently served a
winding-up petition (pursuant to s 218 of the Companies’ Act) on IRDK
due to IRDK’s inability to pay its Judgment debt.
IRDK applied to stay the execution of the Judgment pending the appeal it
had launched against the decision in Econpile No 1. The grounds for the
stay application were: (1) that it would face difficulties in pursuing its
appeal against Econpile No 1 if it was wound up; and (2) that payment of
the Judgment Sum would unfairly prejudice its business.
Therefore, the issues were whether IRDK’s difficulty in pursuing its

appeal in the event of winding up amounted to a “special circumstance”
and whether the potentially unfair prejudice to business by paying
the judgment sum was a “special circumstance” to justify a stay.
127

With respect to the learned judge, this case did not establish new
principles in relation to the stay of execution. Nevertheless, Lee J
provided a succinct summary of the legal principles governing this area
of law, which are canvassed in the subsequent analysis.
An appeal must be distinguished from an application for stay of execution

An appeal does not itself act as a stay of execution of judgment obtained.
However, in exercising the right to appeal, an Appellant may apply for a
stay of execution of judgment entered against it if he shows the existence
of special circumstances justifying the grant of a stay.
The granting of a stay is a matter of judicial discretion

The court will only allow a stay if justified by “special circumstances”.
However, it should be slow to do so, bearing in mind the overarching
purpose of the Construction Industry Payment and Adjudication Act
2012 (“CIPAA”) which is to facilitate cash flow in the construction
industry by way of an expedient, though temporary (if an appeal is
launched) adjudication decision.
The “special circumstances” requirement remains the cornerstone of

allowing a stay application.
“Special circumstances” spans a broad range of categories; the fact that
an appeal would be futile if stay was refused is just one, albeit the most
common, of many factors.
The potential inability of the successful party in an adjudication

to reimburse the sums paid to it in the event the court or arbitral
tribunal overturns the adjudication decision may constitute special
circumstances. However, the onus is on the party alleging the existence
of such circumstances to adduce cogent and credible evidence by way of
an affidavit to support its claim.
(a) Reasonable probability of inability to repay

It is important to note that the requirement of “special
circumstances” is pegged at a very high threshold of “reasonable
probability” of an inability to repay. There must be a real
danger that the other party is unable to pay back. An instance
of such is where the party concerned is in insolvent liquidation.
Notwithstanding the probable inability of the adverse party
to repay the judgment sum, it would not justify the grant of a
stay if the adverse party’s financial position is similar to that at
the time of contracting, or where the adverse party’s financial
position is largely due to the Defendant’s failure to pay the sums
awarded by the Adjudicator.
128

On the facts of this case, the Court held that there was no
evidence to suggest that Econpile was insolvent, nor that it was
not in a sound financial position to be able to repay IRDK should
the latter succeed on appeal.
(b) Unfair prejudice

Prejudice must be considered, not just from the Judgment
Debtor’s position, but also the Judgment Creditor’s position. If
the Judgment Debtor were permitted to say that the Judgment
Creditor should not be entitled to enjoy the fruits of its litigation
until it has exhausted its next tier of appeal, then the overarching
purpose and undergirding philosophy behind CIPAA would be
compromised.

Furthermore, the test of special circumstances is not calibrated
according to the relative hardship that parties would suffer.

In this case, whilst the court acknowledged the severity of IRDK’s
cash flow problem (ie: that it needed the aid of a third party), Lee
J also had regard for the prejudice that Econpile would suffer
from being deprived of the monies due to it.
(c) Pursuit of substantive remedy

The court in deciding whether or not to grant a stay will also
consider the diligence with which the applicant has pursued the
substantive remedy. Indeed, a failure to proceed with arbitration
or litigation in the face of an Adjudication Decision that one is
unhappy about would weigh against an application for a stay of
the judgment.
It is important to note that the merits of an appeal, or its potential

success are irrelevant considerations in a stay application.
Binding nature of adjudication decision

An adjudication determination is intended to be binding but not final
as it may ultimately be reversed if challenged in court or a tribunal.
However, the rights of the parties to the adjudication are absolutely and
conclusively determined unless and until the adjudication decision is
reversed. Thus, notwithstanding an appeal to court, the adjudicator’s
decision remains binding and must be complied with until the dispute
is finally resolved.
Underlying purpose of CIPAA

The grant of any stay must always take into account the primary object
of CIPAA, which is to ensure a speedy resolution of a payment dispute.
129
Staying access to cash simply because there is another proceeding (such

as an appeal to arbitration or to court) would defeat the concept of
temporary finality as embodied in CIPAA.
A stay, whether of an adjudication decision or Judgment pursuant to an

enforcement action, will only be granted in exceptional circumstances;
with stricter requirements of “special circumstances” in the latter
instance.

In light of the principles above, parties to an adjudication are reminded
of the binding nature of the decision.
Under CIPAA, the guiding principle for parties is to “pay first, argue
later”. Where the losing party is dissatisfied with the decision rendered,
it ought to file an appeal to the courts or to commence arbitral
proceedings if appropriate. Nevertheless, the parties must perform
their obligations as stipulated in the adjudication decision as it remains
binding until overturned on appeal.
The fact that an appeal has been filed does not detract from the parties’
obligations. A stay of execution can be applied for in respect of the
adjudication decision or of judgment entered pursuant to an action
to enforce the adjudication decision. However, the grant of such a stay
application is subject to the court’s exercise of its discretion, and will
only be granted if there are “special circumstances” present.
Typically, courts are slow to recognise the existence of “special

circumstances” so as to justify a stay. This approach accords deference
to legislative intent, namely to facilitate cash flow in the construction
industry by way of an expedient dispute resolution process under
statute.
130
COMMENTARY 2
by Ir. Lai Sze Ching
Introduction
The Plaintiff (“Econpile”) had earlier obtained a Court order to enforce
an Adjudication Decision against the Defendant (“IRDK”) for an amount
of RM1.9 million under a Payment Certificate issued but not paid. At
the same time IRDK’s application for setting aside the Adjudication
Decision had been dismissed. Thereafter Econpile served on IRDK a
s 218 Companies Act 1965 Notice for winding up. Thus, IRDK applied
for an unconditional stay of the enforcement order and hence stay of
execution of the judgment of the Adjudicated Sum, pending IRDK’s
appeal against the High Court decisions allowing the enforcement
of the Adjudication Decision and dismissing the setting aside of the
Adjudication Decision application by IRDK. It must be noted that this is
not a stay of the Adjudication Decision but a stay of the execution of the
said court order.
As a general rule, the Court will not deprive a successful party of the
fruits of his litigation and will allow the Court order to be executed,
unless the unsuccessful party can show special circumstances to justify
the application for the stay.

IRDK raised two grounds to justify their application:
(1) The difficulty of IRDK in pursuing its appeal should it be wound
up;
(2) Payment of the judgment sum would unfairly prejudice IRDK’s
business.
The Court answered both the above questions negatively and held that
the grounds did not amount to special circumstances that warrant the
Court to grant a stay of execution and accordingly dismissed IRDK’s
application for stay.
(a) Difficulty to pursue appeal

Firstly, the Court noted that the Adjudication Decision had been
granted as a judgment of the Court and there was no dispute on
this. Secondly, a winding up petition is not an execution process
but a mode of recovering a debt, and in this case a judgment debt.
131

Once a judgment had been entered, the judgment debt was no
longer a disputed debt. In addition, Econpile is a wholly-owned
subsidiary of a listed company on the Kuala Lumpur Stock
Exchange and there was no evidence to suggest that it was not
in a sound financial position to be able to repay should IRDK
succeed on appeal.

The Court then concluded:
“Whatever may be the natural consequences of being wound-
up and with it the impediment, though not insurmountable,
of proceeding with its appeal already filed, these cannot in
the circumstances of the case, be special circumstances,
justifying a stay of the monetary judgment.”
(b) Unfairly prejudice IRDK’s business

The Court observed:
“The fact that IRDK has difficulty raising the judgment sum
and has to call a third party to its aid are clear indications that
it has a serious cash flow problem. Prejudice here must not
be considered solely from the perspective of the Judgment
Debtor IRDK but also from the perspective of the Judgment
Creditor Econpile. There is prejudice that Econpile will suffer
and have to continue to suffer because it has been deprived
of dear monies due to it in an Adjudication Decision that has
now crystallized to be a judgment debt. Cash flow is the very
lifeblood of all players in the construction industry.”
The Court then held that the test as to whether to grant a stay
is not the relative hardship that the parties would suffer with
IRDK suffering more as submitted by them. It was emphasized
that pursuant to s 13 of CIPAA, the Adjudication Decision was
binding until it was overtaken by an Arbitrator’s award or Court
decision on the litigation.
(c) Test to be adopted in granting stay

The Court concluded that stay should only be granted in
exceptional circumstances and such circumstances must
necessarily refer to the financial status of the contractor who had
succeeded in the adjudication proceeding. Other factors such as
the merits of the case before the arbitration or the court; or even
the chances of success in setting aside the Adjudication Decision
were not relevant considerations. Instead the grant of any stay
must always take into consideration the primary objective of
CIPAA, i.e. to ensure a speedy resolution of a payment dispute
and to inject much needed cash flow into the construction
industry.
132

The above decision clearly indicates that the court is supportive of
the implementation and enforcement of CIPAA. It must be noted that
cash flow is crucial and critical for all contractors, subcontractors and
suppliers down the chain of construction. If the payments from an
Employer do not cascade down to those below the chain, the lifeblood of
those below the chain will be affected seriously and this would eventually
threaten their survival. The judgment debt, being an adjudicated
amount, should be paid first by the Employer and argued later. In fact,
there should not even exist a need to register the Adjudication Decision
as a judgment of the Court first before the Employer is obliged to pay.
Construction industry prospers and survives based on the basic

understanding that payments must be made by all parties down the
chain. The Employer must pay the Contractors and Contractors in turn
must also pay their Subcontractors and suppliers, etc. The contractors
and Subcontractors cannot be expected to fund the construction project.
In this case the court had emphasized that any application to stay the
execution of a judgment that had proceeded from an Adjudication
Decision must be subject to closer and stricter scrutiny than an
application to stay an Adjudication Decision. The Court would take into
account the overarching purpose of CIPAA, which was to facilitate cash
flow in the construction industry and the fact that the Contractor should
not be deprived of the very benefit of why it resorted to adjudication in
the first place.

The Employers are advised to plan their cash flow carefully before
implementation of any construction projects. They must ensure that
finances are in place as any hiccup would affect cash flow and hence the
lifeblood of the contractors and also those down the chain. The court
would not hesitate to enforce the Adjudication Decision and to ensure
that the overarching purpose of CIPAA was complied with.
133
Kwan Hee Wee v T Mont Builders Sdn Bhd

CIVIL APPEAL NO: 12BC–6–07/2015
22 JANUARY 2016
_________________________
[2017] 1 CIDB-CLR 134
The Defendant/Respondent had subcontracted the interior and exterior fit

out works in a construction project to the Plaintiff/Appellant. The subcontract
was purportedly pursuant to a work order which fixed the contract sum at
RM2,614,250.00. The Plaintiff claimed that it had accepted the Defendant’s
work order on 28 November 2012 and had commenced work, accomplishing
certain preliminary works. After the Plaintiff had completed the mock-up unit
for the project in January 2013, the Defendant told the Plaintiff to cease work and
thereafter the Defendant unilaterally terminated the Plaintiff’s services without
any explanation. The Plaintiff then invoiced the Defendant for work done up to
that date, i.e. for preliminary works to the value of RM968.846.00; and for loss
of profits. The Defendant refused to pay, hence the Plaintiff sued. The following
issues arose for determination: (i) whether there was a contract between
the parties and if the answer was in the positive, whether the Defendant was
entitled to unilaterally terminate the services of the Plaintiff as subcontractor;
(ii) whether the Plaintiff had carried out its preliminary works and whether the
Plaintiff was therefore entitled to claim the sum of RM968,846.00. The learned
Sessions Court Judge (“SCJ”) had held that the Plaintiff had failed to provide
conclusive evidence that the work order had been finalized. The Court was of
the opinion that the parties were still at the negotiating stage. That being the
case, the SCJ held that there was no issue that the Defendant had unilaterally
terminated the Plaintiff’s appointment because there was no valid agreement
to begin with. The SCJ had further held that whilst there was clear evidence
of work done and that the Plaintiff was entitled to make a claim for such
preliminary works, the Plaintiff’s claim of RM968,846.00 was not proven. The
SCJ also held that the Plaintiff’s claim was one for “expenses”. The SCJ thus only
awarded the Plaintiff nominal damages of RM70,000.00. The Plaintiff appealed
against this quantum of RM70,000.00. The Defendant cross-appealed on the
grounds that the damages of RM70,000.00 was excessive.
Held, allowing the appeal and dismissing the cross-appeal:
(1) The SCJ’s decision to dismiss the Plaintiff’s claim for the sum of
RM968,846.00 and award instead a nominal sum of RM70,000.00
was a serious misdirection in law and in fact which required appellate
intervention to set right.
134
(2) The existence of a contract was actually not in issue; certainly not in the
Defence filed. The Defendant’s pleaded case was that the Plaintiff did not
do the work as instructed; and that it was not obliged to pay because the
work had not been approved by the local authorities; and that the work
order could not be relied on as the Plaintiff was proposing changes to it;
and that it was not signed. All these were far removed from saying there
was no contract between the parties in the first place. Since the pleaded
case did not devolve any issue on the question of the existence of a valid
contract, but really whether the Defendant had a right to terminate where
the Plaintiff was said to have not carried out work according to the work
order; or that the work had to be approved by the local authorities, the SCJ
had asked the wrong question.
(3) The SCJ was in fact presented with ample evidence on the existence of
contract. There was the quotation which itemised the details of work
for the project and to which the Plaintiff had pegged its price; emails
exchanged between the parties on the work order to be issued where the
parties were merely deciding whose name to designate for the contract;
and the Defendant’s unequivocal instructions to the Plaintiff to carry out
preliminary works. A valid contract was established.
(4) The claim for preliminary works was not a claim for out-of-pocket
expenses. It was a claim for work or services rendered at the preliminary
stage; hence, what was termed as “preliminary work” or “preliminaries”.
The details of such work were set out in the work order and comprised
general matters, materials and samples, pricing, temporary works,
contract administration, statutory requirements, particulars of contract
conditions, commission and completion; contingencies. The Plaintiff’s
claim was for a liquidated sum by measurement to the type and progress
of the works required at that particular stage of the works.
(5) As the parties had agreed on how the contract price was to be paid, and
since for "Preliminaries", there was plenty of evidence proving that the
Plaintiff had carried out works to the value of RM637,500.00, the claim
must be allowed. The details of the Plaintiff’s work were properly before
the Court and there was not much in challenge or serious challenge by the
Defendant. Consequently, the Plaintiff’s claim for RM637,500.00 should
have been allowed.
135
COMMENTARY 1
by Karen Ng Gek Suan
Partner at Azman, Davidson & Co
Adjudicator
Introduction
This case concerned an appeal to the High Court against the decision of
the Sessions Court which held as follows:
(1) That there was no existence of the subject contract (“Contract”)

on the basis that the Contract was in the negotiating stage. The
Plaintiff/Appellant had failed to provide conclusive evidence
that the works order had been finalised. That being the case, the
issue on the Defendant/Respondent’s unilateral termination of
the Contract did not arise, as there was no valid contract to begin
with;
(2) There was clear evidence that the Plaintiff/Appellant had

carried out some preliminary works and was entitled to
payment. However, the Plaintiff/Appellant’s claimed amount
being "expenses for work" had not been proved, resulting in only
nominal damages being awarded.
The High Court held that the Sessions Court had erred and overturned
the above stated decision. The High Court held as follows:
(a) That on the contrary, a valid contract was established. There
was a common intention to create a legal relationship. The
scope of the subject matter was the fit-out works and its scope
was defined and agreed, with a pegged contract sum. This was
evident from the following evidence taken altogether showed an
existence of a valid contract:
(i) there was a quotation which itemised details of fit-out
works with quantities/price where a total final amount/
price was pegged;
(ii) there were emails exchanged between parties on the works
order to be issued, in that the parties were merely deciding
whose name to issue the works order to; and
(iii) there was an unequivocal instruction for the preliminary
works to be commenced/carried out.
(b) It was not disputed that the preliminary works had been carried
out which gave rise to the entitlement for payment. The claim
for preliminary works is not a claim for expenses. Instead, it is a
136
claim for works completed in accordance to the stages of works

as per the work order.

The lesson to be taken from this case is a trite principle in contract
law, namely, an acceptance of an offer need not come in a specific form.
In this respect, a finalised/issuance of Works Order (as per common
practice in the industry which is of course, good practice) is not the only
mode of acceptance of a quotation for works.
This case also illustrates how the conduct of a party amounts to an

acceptance. In this connection, an unequivocal instruction to proceed
with works after the receipt of quotation which included the said works
was deemed as an acceptance to the said quotation rendered. The High
Court in this case had emphasized that the Defendant/Respondent
(main contractor) would not have instructed the Plaintiff/Appellant
(subcontractor) to proceed with the preliminary works had the former
not known what such works would entail. The High Court held that this
suggested that:
(i) the absence of the settlement of confirmation of the work order
was no impediment to the intention to create legal relationship
and the presence of consensus ad idem; and
(ii) preliminary works being a specific works listed under the work
order meant that the Defendant/Respondent (main contractor)
fully understood the scope of works and how payment would be
scheduled following the quotation.

The general rule and best practice to be adopted is that contractors
should only commence works upon the finalisation of negotiations and
upon/after the issuance of a Works Order/Letter of Award to them.
However, in the event contractors are placed in circumstances where

they have no choice but to commence preliminary works (such as
securing a project site, placing temporary works/hoardings, and/or
constructing mock-ups, etc., perhaps because they are taking over a
previous contractor’s works/site or for whatsoever reason), it is suggested
that these preliminary works be instructed to them separately, with a
mutual agreement (and must put in writing) that such costs be absorbed
into the contract price later awarded (which obviously would have
already been priced for); and if the contract is not awarded to them,
be billed separately. If the above is not done, the contractors can in any
event still sue for works done on a quantum meruit basis.
137
COMMENTARY 2
by Datuk Chia Lui Meng
CQS, FRISM, MRICS
LLB (Hons), CLP
Introduction
This case highlights the formation of contracts and the basis for the
contract. In this instance, the Contract Document was a “Works Order”
issued by the Main Contractor (Defendant) to the Subcontractor
(Plaintiff). The basis for the Works Order was the Quotation submitted
by the Subcontractor which listed down the items and quantities.
Amongst them is the Preliminaries Items which were priced by the
Plaintiff.
In contract administration, the Subcontractor’s Quotation was

considered as an Offer and the Main Contractor’s “Works Order” was
the Acceptance. The question in relation to the validity of an existing
Contract and the Subcontractor’s and Main Contractor’s intention to bind
each other in a Contract was not disputed by their subsequent conduct.
The Main Contractor subsequently issued work instruction order for
the mock up unit and the Preliminaries Items and the completion of the
scope of work by the Subcontractor was sufficient to establish a legal
relationship and a proper contract.
Upon completion of the mock up unit and the Preliminaries Items, these
works could be measured in a bill of quantities or lump sum by using
the rates in the established “Work Order” when certifying the payment
made.
The claim for work done by the Subcontractor are not special damages
nor are they to be measured on “Quantum Meruit” basis as these
completed works are regarded as “Works Done” and to be paid according
to the rates and quantities measured. The Subcontractor’s claims which
were in this format were sufficient for the evaluation for of payments.
The termination without notice and without justification or any default

by the Subcontractor was considered invalid. The Main Contractor had
pleaded that there was no Contract upon the non-signing of the first
Works Order and the non finalization of the negotiation. However,
the Main Contractor’s conduct in terminating the Subcontractor’s
employment is deemed to have bound the Main Contractor into a
contractual relationship.
138
Had the Contract not subsisted as pleaded, the fact that the subsequent
issuance of an instruction to the Subcontractor to carry out the
preliminary works in view of the urgency of the project, was evidence
enough to create another legal relationship and thus a binding contract.

Works can only commence upon the finalization of negotiations and
issuance of a valid Letter of Award/Works Order. The Works Order need
not be signed but receipt of such must be acknowledged. This suffices
to justify a valid contract.
Care should be taken to ensure that if the “Works Order” is varied or

changed, proper Architect’s Instructions or new “Works Order” is
obtained to validate the changes.
Preliminaries Items are not “out of pocket expenses” but form part
of the scope of works in the contract. Upon completion of works, the
stipulated evaluation of the quantities shall be made for the certification
of payment.

A Subcontractor’s obligations is to complete the works as stipulated and
any changes shall be considered a Variation Order.
Authorities approvals are always the Employer or Main Contractor’s

responsibilities to obtain and if Authorities requires further
amendments, these should be in the form of an Architect’s Instruction
to vary the works done and a Variation Order to follow with a price
adjustment if necessary.
If an Architect’s Instructions is not forthcoming, then the Subcontractor

can send a letter to the Architect to confirm in writing the variations
ordered, and which can be used to later support a construction claim.
139
Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd &
Another Case
ORIGINATING SUMMONS NOs: WA–24C–39–06/2016 & WA-24C-47-06/2016
LEE SWEE SENG J
1 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 140
Martego Sdn Bhd (“Martego”) was the Plaintiff in the Setting Aside Application
(OS 39) of an Adjudication Decision delivered on 14 April 2016 and the
Defendant in the Enforcement Application (OS 47). Arkitek Meor & Chew Sdn
Bhd (“ARMC”) was the Defendant in OS 39 and the Plaintiff in OS 47. ARMC was
the successful Claimant in the adjudication and Martego was the Respondent.
Martego had engaged ARMC as the Project Architect for a development
project (the “Project”). ARMC commenced work under the Contract but was
subsequently terminated by the Plaintiff. ARMC accepted the termination
and claimed RM599,500.00 being the balance of their professional fees. The
Adjudicator granted ARMC part of the sum claimed. The grounds for Martego’s
application for setting aside the Adjudicator’s decision was two-fold; first it was
on the ground that the Adjudicator had acted in excess of his jurisdiction in
delivering the Adjudication Decision and secondly, that there had been a denial
of natural justice in the Adjudicator’s failure to hold a hearing despite numerous
requests from Martego. The issues arising for determination were, inter alia :
(i) whether the contract between the Architect and Martego for the payment
of fees for architectural consultancy services rendered it a "construction
contract" under the Construction Industry Payment and Adjudication Act 2012
(“CIPAA”); (ii) whether a firm of Architects may claim its professional fees in
an Adjudication under CIPAA with respect to consultancy services rendered in
a construction contract; and (iii) whether there had been a breach of natural
justice when the Adjudicator decided to proceed with the Adjudication without
an oral hearing.
Held, dismissing Martego’s Setting Aside application and allowing ARMC’s

application to enforce the Adjudication Decision with costs:
(1) A "construction consultancy contract" would cover and include a contract

to carry out consultancy services in relation to construction work and
includes planning and feasibility study, architectural work, engineering,
surveying, exterior and interior decoration, landscaping and project
management services. If Parliament had wanted it to be confined to only a
"design and build contract" they could have said so in clear terms and the
industry understands what a "design and build contract" is.
140
Martego Sdn Bhd v Arkitek Meor & Chew Sdn Bhd & Another Case
(2) The use of the word "includes" in definitions is a device designed to

give the definition an expansive meaning and not an exhaustive one; the
matters stated therein are more by way of examples leaving the scope and
ambit of it rather open ended within that broad definition. If at all, the
design and build contracts envisioned by Parliament, would be inclusive
and not exhaustive. In other words the definition of "construction
consultancy contract" would well cover a "design and build" contract but
it is not confined to that. It covers the professional services of an architect
as well as engineers and surveyors. The important thing is that the works
and services must be integral to the construction consultancy contract
and not incidental thereto.
(3) The Adjudicator had the jurisdiction to adjudicate the payment claim
of the Architect premised as it was on services provided under a
construction consultancy contract. To allow an Architect to claim for his
fees under a scheme of statutory adjudication is not inherently or innately
incompatible with Adjudication.
(4) Where Adjudication is concerned, CIPAA is certainly a special piece of

legislation that would in that sense prevail over the Architects Act which
deals generally with matters pertaining to Architects.
(5) Martego could have commenced Arbitration proceedings concurrently

with Adjudication pursuant to s 37(1) of CIPAA. Whilst the use of the word
‘shall’ in sub-rule 24(1) of the Architects Rules makes it unequivocal that
the parties refer their dispute on Architect’s fees to Arbitration as opposed
to Litigation, that does not mean that Architects cannot avail themselves
of a subsequent mode of dispute resolution mechanism introduced later
albeit of temporary finality in Adjudication.
(6) The Adjudicator had carefully considered the request for an oral hearing
and had given his reasons for rejecting the request in the Adjudication
Decision. The reasons given by the Adjudicator was a finding of fact based
on the documentary evidence before him and not a case where there had
been a breach of natural justice in arriving at the decision that he did.
(7) The Adjudicator considered the evidence in the documents submitted by

both parties and after reading the submissions of both parties, he arrived
at his decision. The party aggrieved by his decision cannot elevate the
rejection of their request for an oral hearing to a breach of natural justice
on the assumption that had he heard the witnesses orally, he would have
come to a different decision. That was not a ground countenanced under
s 15 of CIPAA and this was not an appeal. It could not be said that the
Adjudicator committed a breach of natural justice merely because he did
not decide the dispute in accordance with the preferred manner advocated
by one of the parties or refused to assign the weight to the evidence as
expected by a party.
141
(8) An expansive reading must be given to the definition section where the
purpose of CIPAA is concerned to ensure that the benefits of it would
flow downwards to all who have hitherto been affected by the culture of
delayed payments in construction contracts.
COMMENTARY 1
by Tan Swee Im
Consultant at Tan Swee Im, Siva & Partners
Introduction
The case provides guidance on whether the Construction Industry
Payment and Adjudication Act 2012 (“CIPAA”) may be used for recovery
of architect’s fees.
Martego Sdn Bhd (“Martego”) had engaged Arkitek Meor & Chew
Sdn Bhd (“ARMC”) as the Project Architect for a mixed development
project. ARMC commenced work but was terminated by Martego, which
termination was accepted by ARMC. However ARMC claimed for the
balance of unpaid professional fees. ARMC made this claim under CIPAA
and at the conclusion of the adjudication, the Adjudication Decision was
in favour of ARMC, albeit not for the full amount claimed.
Martego made an application to court to set aside the Adjudication

Decision, which is the subject matter of this case. Martego’s grounds
were that the Adjudicator acted in excess of jurisdiction and that there
had been a denial of natural justice.
The excess of jurisdiction point was on the basis that the contract for
appointment of ARMC did not fall within the definition of “construction
contract” in CIPAA, and that Architects could not avail themselves of
CIPAA for recovery of fees as they are bound by the Architect’s Rules to
arbitration.
As for denial of natural justice, the argument was that the Adjudicator
had proceeded with the adjudication without an oral hearing despite
request for the same by Martego.
The High Court dismissed both points made by Martego and dismissed
the application for setting aside. The High Court held that:
142
(1) the ambit of definition of “construction contract” in CIPAA was

sufficiently expansive to encompass the present consultancy
services which are integral to the construction work. Had
Parliament wanted to confine such services to “design and build
contracts” they could have said so in clear terms but they did
not;
(2) there is no need to see adjudication and arbitration as mutually

exclusive of each other as adjudication would only yield
temporary finality and it is only with arbitration or litigation
that one gets a final and binding decision. Adjudication operates
independently on a separate track and is an additional dispute
resolution mechanism;
(3) the Adjudicator made findings of fact based on documentary

evidence and it is not a case of breach of natural justice in
arriving at the decision he did. The principles of natural justice
are concerned with the provision of fair hearing to contending
parties and do not mandate any particular result.

CIPAA is another dispute resolution mechanism in addition to
arbitration and litigation, thus one need not have to choose an “either/
or” approach between adjudication and arbitration and one can proceed
with a “both/and” approach. The question of which would prevail over
the other does not arise at all.
The ambit of both a construction work contract and a construction

consultancy contract in CIPAA are expansively defined. The word
“includes” in definitions is a device designed to give definitions an
expansive meaning and not an exhaustive one. The matters stated
therein are more by way of examples leaving the scope and ambit of it
rather open-ended within that broad definition. An expansive reading
must be given to the definition section where the purpose of CIPAA is
concerned to ensure that the benefits of it would flow downwards to all
who have hitherto been affected by the culture of delayed payments in
construction contracts.
The principles of natural justice are concerned with the provision of fair
hearing to contending parties and do not mandate any particular result.
If an Adjudicator considered the evidence in the documents submitted
by both parties and arrived at the decision, the aggrieved party cannot
elevate the rejection of their request for an oral hearing to a breach
of natural justice on the assumption that had the Adjudicator heard
the witnesses orally, a different decision would have been reached.
143
It cannot be said that there was a breach of natural justice merely

because the Adjudicator did not decide the dispute in the preferred
manner advocated by one of the parties.
The court does not countenance parties contracting out of CIPAA, which
if allowed can only thwart the purpose of CIPAA altogether.

CIPAA is of wide application and the purpose of CIPAA as contained in
the short title clearly states that CIPAA is “An Act to facilitate regular and
timely payment, to provide a mechanism for speedy dispute resolution
through adjudication, to provide remedies for the recovery of payment
in the construction industry …”. The courts have consistently supported
the intent of CIPAA and generally upheld adjudication decisions, as well
as given expansive readings to the definition section with regard to the
ambit of CIPAA.
Therefore the practice in the construction industry of non–payment

or delayed payment for work done and services rendered, is being
curtailed by the robust application of CIPAA.
For those who fail to make payment or make payments late, the ability
to escape the net of CIPAA is narrow. For those who are affected by
such practice in the construction industry, CIPAA adjudication exists,
together with arbitration and litigation, as an additional dispute
resolution mechanism.
Engaging in non or late payment for work done and services rendered
in the construction industry will in majority of cases, be a futile and
costly exercise.
Parties involved in CIPAA adjudications are well advised to present their

case well, particularly the evidence in the documents, in order to enable
the adjudicator to arrive at the decision since there is no absolute right
to oral hearing. To that end, all parties should make it a priority to focus
on the quality and adequacy of documents produced in the course of
any project and in the adjudication.
144
COMMENTARY 2
by Sr Dr. Noushad Ali Naseem Ameer Ali
CQS, PPRISM, FRISM, FCIOB, FCIArb, MNZIQS, MRICS
Chartered Quantity Surveyor
Chartered Construction Manager
Past President, Royal Institution of Surveyors, Malaysia
Introduction
Martego Sdn Bhd (“Martego”) contracted with Arkitek Meor & Chew
Sdn Bhd (“ARMC”) to provide architectural services for a high-rise
development in Kuala Lumpur. However, after about one year, Martego
terminated ARMC’s services. ARMC then claimed for the remainder
of their fees of RM599,500. In an adjudication under the Malaysian
Construction Industry Payment and Adjudication Act 2012 (“CIPAA”),
the Adjudicator decided an amount of RM 258,550 was due from
Martego (the Respondent) to ARMC (the Claimant).
Two court cases were filed. In the first case Martego applied for the
Adjudicator’s decision to be set aside, and in the second case, ARMC
applied for the Adjudicator’s decision to be enforced. Martego accepted
that if their case for setting aside failed, ARMC’s application for enforcing
the Adjudicator’s decision would follow. Sensibly the two cases were
heard together.
The final outcome of the case heard by Justice Lee Swee Seng was that
Martego’s attempt to set aside the Adjudicator’s decision failed and the
Adjudicator’s decision was upheld and enforced in ARMC’s favour.

The case involved Martego’s attempt to set aside the Adjudicator’s
decision on two main grounds: (1) that the Adjudicator acted beyond
his jurisdiction in the adjudication; (2) that the Adjudicator was in
breach of natural justice for failing to hold a hearing despite numerous
requests from Martego.
Lee Swee Seng J established the issues to be decided under three main
questions to be answered. The first two related questions were posed
to establish whether the Adjudicator acted beyond his jurisdiction and
the third to establish if the Adjudicator had been in breach of natural
justice.
145
The three questions were:
(a) Was the contract between Martego and ARMC for architectural
consultancy services a “construction contract” as defined under
CIPAA?
(b) Can ARMC claim their professional fees under a CIPAA
adjudication?
(c) Was there a denial of natural justice when the Adjudicator
proceeded with the adjudication without an oral hearing despite
repeated requests from Martego?
Challenging the Adjudicator’s jurisdiction

Like in most other jurisdictions that have introduced statutory
adjudication, jurisdictional challenge is one of the more common
ways for parties to attempt to set aside Adjudicators’ decisions. These
challenges are however not taken lightly. In WRP Asia Pacific Sdn Bhd v
NS Bluescope Lysaght Malaysia Sdn Bhd & Other Case [2016] 1 CIDB-CLR
1401 for example, Mary Lim J deliberated on jurisdictional challenges
at length. Although her Ladyship eventually did decide to set aside the
Adjudicator’s decision for various reasons, including breach of natural
justice, she referred to her earlier judgment on a matter challenging
Adjudicators’ decisions which related to Adjudicators’ giving reasons in
their decisions: “The Courts must exercise considerable restraint when
invited to set aside an Adjudication decision reached in very exacting
circumstances and conditions. So much so that I believe it will only be in
the rare and extreme circumstances that the reasons, brief or otherwise is
found wanting.”2 [Emphasis added]
Architectural consultancy services under CIPAA

Returning to the first two questions: Was the contract between
Martego and ARMC for architectural consultancy services effectively a
“construction contract” as defined under CIPAA and was it possible to
claim professional fees under CIPAA?
Section 4 of CIPAA sets out the definition of a “construction contract”

to mean a “construction work contract” or “construction consultancy
contract”. Construction consultancy contract is further defined to mean
a contract to carry out consultancy services in relation to construction
work and includes architectural work and other services.
The ordinary and plain meaning of this appears to be clear: construction

consultancy contract includes among other services, architectural
services. However, Martego, somewhat ingeniously or vexatiously
(depending on how one perceives it) attempted to persuade the court
that ARMC must meet all parts and requirements of s 4.
146
Martego argued that the Adjudicator did not have jurisdiction because
the phrase “construction consultancy contract” in CIPAA relates
specifically to design and build contracts, where the contractor is
engaged to provide the full scope of consultancy services described in
CIPAA. Martego contended that the word “includes” before describing
the range of professional services in CIPAA meant an all-encompassing
role, which included all the services described, adopting an exhaustive
interpretation of the word “includes”. It was suggested that the term
“architectural work” could not be read in isolation, and therefore
a contract for purely architectural services would not be a valid
“construction consultancy contract” under CIPAA.
Lee Swee Seng J did not accept Martego’s argument, preferring instead a
plain reading of the words that suggests “includes” may be used to mean
any one, or a combination of the services listed CIPAA - in other words
“includes” had an expansive meaning. If it were intended to relate only
to design and build projects, then this would have been clearly stated
in CIPAA. His Lordship found the interpretative arguments forwarded
by Martego were “unduly straining the words used in the definition of
a construction consultancy contract”. The ordinary and plain meaning
of construction consultancy contract is clear, it includes architectural
services with or without other scope of work.
Relationship between Architects Act 1967 and CIPAA

Martego persisted with further arguments along the jurisdictional
challenge by arguing that the provisions of CIPAA conflicted with the
Architects Act 1967, which provides arbitration for resolving disputes.
They also contended that where there is a conflict between general
legislation and specific legislation, the specific legislation will prevail.
Lee Swee Seng J, agreed that the dispute resolution method under CIPAA
was adjudication while under the Architects Act it was arbitration. His
Lordship saw no conflict between the two dispute resolution methods.
It has long been established in other jurisdictions and also clearly
provided under s 37 of CIPAA that the two processes can operate
concurrently and complement each other. They are not mutually
exclusive. Given the clarity of s 37 of CIPAA, this can be considered to
be trite law.
There was therefore no issue of jurisdiction. Lee Swee Seng J went on

to conclude: “I have no difficulty in holding that an architect’s fee is
claimable under adjudication under CIPAA”.
Breach of natural justice

Like jurisdictional challenges, allegations of breach of natural justice are
147
also fairly common when challenging an Adjudicator’s decision. CIPAA

expressly provides in s 15(b) for an aggrieved party to apply to the High
Court to set aside an adjudication decision if there has been a “denial of
natural justice”. These cover two aspects:
(i) The need for impartiality and absence of any bias or personal
interest in the outcome of the dispute and, of particular
importance and relevance to this case;
(ii) Both parties must be given a fair opportunity to present their
cases. Justice must not only be done but be seen to be done.
Martego had repeatedly requested for the Adjudicator to hold oral

hearings to hear from witnesses orally. Evidence showed the Adjudicator
clearly considered the requests but rejected the request. So neither party
was given the opportunity at a hearing. The Adjudicator decided that the
services provided by ARMC were based on construction drawings and its
quality, and that the fee could be determined by assessing the drawings
in written form without any oral hearing. The Adjudicator was mindful
of the need to manage time and costs as expected of him under s 24(b)
of CIPAA to act in a “timely manner and avoid incurring unnecessary
expense”. Furthermore, s 12(1) of CIPAA give the Adjudicator wide
powers to “conduct the adjudication in the manner the adjudicator
considers appropriate” including the powers under s 25(a) “establish
the procedures in conducting the adjudication proceedings including
limiting the submission of documents by parties” and under s 25(g) to
“conduct any hearing and limiting the hearing time”.
In this case, Lee Swee Seng J found the Adjudicator had carefully
considered requests for an oral hearing and taking into account all
circumstances, had decided not to have oral hearings. The Adjudicator
even gave his reasons for rejecting the request for oral hearings. It was
held there was no breach of natural justice.

The decision by Lee Swee Seng J leads to the following best practice
suggestions that can help avoid costly and unwarranted future
challenges of Adjudicators’ decisions in court.
(a) More careful and plain reading and interpretation of CIPAA, and
some wider, even if only cursory, reading around legislation
governing payment and adjudication from other jurisdictions
should be encouraged. It would serve to educate the construction
industry that all 14 equivalent Acts around the world governing
payment and adjudication cover most traditional construction
consultancy services – certainly design, architectural, and
148
engineering services. It is plain and simple. These services

need not be part of a design and build construction contract.
Both construction industry players and their advisers, whether
legally qualified or not, should heed this suggestion.
(b) Attempts at getting around jurisdictional issues by maneuvering

around the plain meanings of CIPAA even in “ingenious” ways
will not work. Lee Swee Seng J was fairly firm about this: When
interpreting plain words, “skewing and slanting it to support
one’s stand” will not work.
(c) The earlier initiative mooting the creation of specialist

construction courts (currently in Kuala Lumpur and Shah Alam)
seems to be justified, given the relatively heavy workload of
both courts now and more importantly the quality of judgments
coming from these specialist courts evidenced at least by this
case. At this rate, a further third construction court might
eventuate. A judge unfamiliar with both the full context of CIPAA
and similar legislation from other jurisdictions may either
have fallen for the “ingenious” (or vexatious) arguments put
forward in attempts to set aside the Adjudicator’s decision or
might have taken a much longer time in trying to understand the
idiosyncrasies of the construction industry and how it operates.
This also provides a greater impetus for other jurisdictions to
follow this initiative and create a specialist construction court
in their own jurisdictions. To date, since the UK specialist judges
started dealing with construction cases over 100 years ago, only
Malaysia appears to have fully and officially followed suit.
(d) Adjudicators should proceed with even greater confidence

(and without the unnecessary fear that every step they take
may be the subject of a challenge for breach of natural justice)
that they not only have the support of express provisions of
CIPAA empowering them to be the master of their adjudication
processes, but that judges will also back them up. This is of
course on the assumption that the Adjudicators do not blatantly
fall short of the required standards relating to the rules of natural
justice – like communicating with one party without the other
present or without giving both parties a chance to respond.
(e) In this case, assuming the Adjudicator was primarily concerned

about costs and timing for a hearing (but might have preferred
to have a hearing if not for these concerns), conducting a hearing
via electronic media may be considered. A web-based video-
conference such as Skype or Adobe Connect - both of which allow
149
multi-party video conferencing – can be much more efficient and

quicker to organize. There is no complex software or hardware
required.
(f) Parties to an adjudication and their advisers may also be

advised to not resort to all tactics, whether credible or not,
when attempting to challenge and set aside an Adjudicator’s
decision. Such approaches in cases involving adjudication come
at the expense of time and money. Parties must remember that
adjudication was intended to provide a speedy and economical
dispute resolution method for the construction industry – and to
facilitate cash flow. If a party is completely dissatisfied with the
outcome of an adjudication, and if it is of the opinion it has been
fundamentally wronged, it can always resort to filing the same
dispute in arbitration if there is such agreement, failing which it
can refer the same dispute to a court.
(g) Finally this case also serves as a reminder to both the

construction and dispute resolution industries to constantly
improve themselves by continuous professional development.
That includes (obviously to be interpreted in an expansive
sense) reading cases such as this. The standards and bar for
Adjudicators’ competency must continually be maintained at
high levels and Adjudicators must keep abreast of the latest
developments.
_____________________________________
1. For the commentary on this case, see [2016] 1 CIDB-CLR 140 at 142-147
(published in CIDB Construction Law Report 2015).
2. See specifically [2016] 1 CIDB-CLR at 143-144.
150
Rimbunan Raya Sdn Bhd v
Rimbunan
Wong Brothers Building Construction Sdn Bhd Raya Sdn Bhd
& Another Casev
Rimbunan Raya Sdn Bhd v Wong Brothers Building

Construction Sdn Bhd & Another Case
ORIGINATING SUMMONS NOS: WA–24C–56–07/2016 &
WA–24C–62–08/2016
LEE SWEE SENG J
30 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 151
Rimbunan Raya Sdn Bhd (“RRSB”), the Employer for a construction project (“the
Project”), appointed Wong Brothers Building Construction Sdn Bhd (“WB”) as
the main contractor for the Project. RRSB and WB executed the formal contract
document premised on the PAM Conditions of Contract 2006 (with Quantities)
(“the Main Contract”). The said Project was duly completed. WB then, as the
Claimant, commenced adjudication proceedings against RRSB, as Respondent,
under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”)
claiming the balance amount certified as due under the Penultimate Certificate
and the outstanding sum under Final Certificate issued by the Superintending
Officer who was the Architect appointed by the RRSB. There were 2 Originating
Summonses before the Court. One was RRSB’s application pursuant to s 15(b),
(c) and (d) of CIPAA to set aside the decision of the Adjudicator (“OS1”).
The other was WB’s application pursuant to s 28 of CIPAA to enforce the
Adjudicator’s decision (“OS2”). The issues arising for determination before the
Court were, inter alia: (i) whether the payments under certain Variation Orders
were due even without the signature of the Respondent’s representatives.
The Respondent submitted that the Variation Price Request and the Variation
Order had to be signed by representatives from RRSB; and (ii) whether the
Maybank Base Lending Rate was 6.85% and that the late interest payment
of 1% above that may be imposed on late payment. Clause 30.17 of the Main
Contract provided that in the event of any late payment, interest at the rate
of Maybank Base Lending Rate plus 1% shall be payable by the defaulting
party on such outstanding amount until the date payment is made. The issues
before the Adjudicator were whether the Claimant was entitled to Variation
orders Nos. 25, 28 and 40 until 44 and rate of late payment interest. This sum
of RM600,422.30 was detailed and supported by the documents filed with the
Adjudication Claim. This was the sum in the Architect’s Final Certificate and
was the second part of the Claimant’s claim. The first part consisted of the
Claimant's Claim under the Penultimate Certificate. RRSB contended that WB’s
claim for RM691,296.54 in the Adjudication Claim was not sustainable as this
was the Penultimate Certificate sum which was already taken into account and
adjusted when the Final Certificate was issued. The Respondent contended that
to claim for the sum stated in the Penultimate Certificate as well as the Final
Certificate sum was akin to making a double claim and that the Adjudicator did
151
not address his mind to this double claim. The Respondent also contended that
there had been a breach of natural justice on the grounds that the Adjudicator
had not been independent and impartial.
Held, dismissing OS1 and allowing OS2 with costs:
(1) Under s 27(1) of CIPAA it was clear that the Adjudicator’s jurisdiction was
both circumscribed by and confined to the Payment Claim filed under s 5
and the Payment Response filed under s 6 of CIPAA. It was not unlike the
Statement of Claim and Defence filed in the pleadings before a Court in
litigation. In as much as a Judge should not stray beyond the pleadings,
likewise an adjudicator had to confine himself to the issues raised in the
Payment Claim and the Payment Response.
(2) The issue regarding the double claim was not raised in the Payment
Response filed by the Respondent. All that the Respondent raised was that
they denied the claim and that they had asked for substantiation of the
Claimant’s claim. As the matter of a double claim was raised for the first
time in the submissions filed, the Claimant’s solicitors rightly objected to
it being raised and had nevertheless replied it to the satisfaction of the
Adjudicator who did not find any double claim between the Penultimate
Certificate and the Final Certificate.
(3) There had not been any double claim in the Penultimate Certificate
and the Final Certificate. The amounts in the Penultimate Certificate
amounting to RM691,296.54 did not overlap with the certified amount
in the Final Certificate of RM600,422.30. Thus the learned Adjudicator
had found both sums remain due and payable to the Claimant. This was a
finding of fact which the Court had no basis to interfere with in a setting
aside application.
(4) Even assuming that the learned Adjudicator had been wrong, that was to
be corrected at arbitration if the Respondent was minded to pursue as the
adjudication decision was of temporary finality only.
(5) There was clearly no good ground for asserting that there had been a
breach of natural justice just because the Adjudicator had, even assuming
for a moment, failed to appreciate the evidence or had even misconstrued
the evidence before him. Much less could it be alleged that the Adjudicator
had failed to act impartially or independently merely because the
Respondent was unhappy with the decision arrived at.
(6) Payments had in the past been made even when the forms were not
duly countersigned and that there had been part payments towards the
Penultimate Certificate. There was no provision for signatures by the
Respondent.
152
Rimbunan
& Another Casev
(7) Whilst it could be said that the reasons given by the Adjudicator in his
decision were brief, it was no doubt sufficiently cogent and clear and a
Court would be slow to conclude that there had been a breach of natural
justice or that there had been biasness or a lack of impartiality on his part,
just because fuller reasons should have been given.
(8) There were no merits in the Respondent’s contention that the interest for
late payment must be included in the Final Accounts. In fact clause 30.11
of the Main Contract provided that in preparing the Final Accounts, the
consultants need not include the late payment interest as set out in clause
30.11(g).
(9) While the rate of interest charged i.e. the Maybank rate, was not found
in the documents tendered at the adjudication, the Claimant’s witness
when questioned, had stated that he had checked this with Maybank. In
the absence of evidence to the contrary produced by the Respondent, the
Adjudicator was justified to accept as proof on the balance of probabilities
that the Base Lending Rate was correct. At any rate the Respondent had
not disputed this as an issue in their Payment Response.
(10) There had not been any breach of natural justice and neither could it be
said that the Adjudicator had not acted impartially or independently,
much less that he had acted in excess of his jurisdiction. The Adjudicator
had given proper consideration to the issues before him in spite of the
Respondent’s vague pleading in the Payment Response filed. He had also
given sufficient reasons to justify his findings, conclusion and decision
though the reasons were brief.
153
COMMENTARY 1
by Chan Yew Hoong
Messrs Azman Davidson & Co
Introduction
The Defendant in this case commenced an adjudication under the
Construction Industry Payment and Adjudication Act 2012 (“CIPAA”)
against the Plaintiff for, among other claims, certified sums under a
penultimate certificate and outstanding sums under a final certificate
issued by the Superintending Officer. The Adjudication Decision that
was subsequently issued was decided in favour of the Defendant.
The Plaintiff thereafter applied to the High Court to set aside the
Adjudication Decision on the grounds that the Adjudicator breached the
rules of natural justice, acted in excess of his jurisdiction and failed to
act independently and impartially.

The limited circumstances in which an adjudication decision under
CIPAA can be set aside are set out in s 15 of CIPAA. These circumstances
are as follows.
(1) The adjudication decision was improperly procured through
fraud or bribery;
(2) There has been a denial of natural justice;
(3) The Adjudicator has not acted independently or impartially; or
(4) The Adjudicator has acted in excess of his jurisdiction.
As is usually the case, the Plaintiff in this case applied to set aside the
adjudication decision pursuant to sub-sections 15(b), (c) and (d) of
CIPAA.
In Am Associates (Singapore) Pte Ltd v Laguna National Golf and Country

Club Ltd [2009] SGHC 260 (a case referred to by the High Court in this
instance), the Singapore High Court explained that the term "natural
justice" consists of two rules: the first is that a man should not be the
judge in his own cause, and the second is that the judge or Adjudicator
or other arbiter must hear both sides of the dispute. In this regard, sub-
section 15(c) of CIPAA refers to the first rule, while sub-section 15(b) of
CIPAA refers to the second rule.
Thus, in order for a court to come to a finding that there is a breach of

natural justice pursuant to sub-section 15(b) of CIPAA, the Adjudicator
must have conducted the proceedings in such a manner that one or
154
Rimbunan
& Another Casev
both parties to the proceedings were not given an equal opportunity,

or an adequate opportunity, to present his own case and meet the case
against him.
The High Court in this case found that the Defendant’s allegation of
breach of natural justice could not be sustained because the Adjudicator
gave both parties adequate and equal opportunities to present their
respective cases including, equal opportunities to submit documents,
witness statements and written submissions.
The High Court held that it was not a breach of natural justice simply
because the Adjudicator had been wrong, or failed to appreciate the
evidence or had misconstrued the evidence before him. It also held that
it could not interfere in a finding of fact made by the Adjudicator. The
High Court’s approach is consistent with the policy behind the CIPAA
2012 that adjudication should only be an intervening provisional stage
in the dispute resolution process under the rubric of "pay now, argue
later" (see UDA Holdings Bhd v Bisraya Construction Sdn Bhd & Anor and
another case [2015] 11 MLJ 499). Therefore, any errors committed by
the Adjudicator are to be corrected and finally resolved at arbitration or
litigation in the court.
In respect of the argument that the Adjudicator failed to act

independently or impartially in accordance with sub-section 15(c) of
CIPAA, the High Court in this case agreed that it was an objective test
and adopted the approach in Glencot Development and Design Co Limited
v Ben Barrett & Son (Contractors) Limited [2001] BLR 207. The test
is whether “the circumstances would lead a fair-minded and informed
observer to conclude that there was a real possibility or a real danger, the
two being the same, that the tribunal was biased”.
The High Court held that it could not be alleged that the Adjudicator
failed to act impartially or independently merely because the Plaintiff
was unhappy with the decision he arrived at.
The High Court further held that where reasons given by the Adjudicator
were brief, but sufficiently cogent and clear, it would be slow to conclude
that there had been a breach of natural justice or a lack of impartiality
just because fuller reasons should or could have been given. This is a
positive development and an important point to note because pursuant
to sub-section 12(4) of CIPAA, an adjudication decision is required
to contain reasons for the decision made by the Adjudicator. Due to
the strict time limit imposed by CIPAA for the Adjudicator to make
his decision, it would at times be a difficult task for the Adjudicator
to deal with every argument and allegation raised by the parties.
155
So long as the Adjudicator correctly dealt with the issues at hand with
cogent and clear reasons, it would not be a breach of natural justice
merely because the Adjudicator did not address every argument and
allegation raised.
The last challenge raised by the Plaintiff in this case was that the
Adjudicator acted in excess of his jurisdiction pursuant to sub-section
15(d) of CIPAA. The Plaintiff however did not seriously pursue this
challenge despite having raised it. It is sufficient for present purposes to
note that an Adjudicator’s jurisdiction, as spelt out in sub-section 27(1)
of CIPAA, is confined to matters that were referred to adjudication by
the parties pursuant to their respective Payment Claim and Payment
Response, unless parties agree in writing to extend the jurisdiction of
the Adjudicator.

An application to set aside a validly obtained adjudication decision is an
uphill task. Such an application, is not, and should not be treated as an
ordinary appeal. In order for an applicant to succeed, he must show a
real danger of bias or some other form of a breach of natural justice by
an Adjudicator, such as not affording the party an equal opportunity to
present its case.
An adjudication decision confers a temporary but binding decision.

Owing to the peculiar nature of adjudication decisions, the proper
recourse available to an aggrieved party against a validly decided
adjudication decision is to resolve the disputes that are the subject of
the decision in court or by way of arbitration.
156
Rimbunan
& Another Casev
COMMENTARY 2
by Ir. Harbans Singh K.S
HSKS Dispute Resolution Chambers
Introduction
This case constitutes one of the string of cases that are flooding the
Construction Court with the “winner” (i.e. the party in whose favour the
adjudication decision was made) attempting to enforce the adjudication
decision pursuant to s 28 of CIPAA, and the “loser” (i.e. the party
against who the adjudication decision was made) trying to set it aside
under s 15 of the said Act. The two applications under two separate
Originating Summonses were heard together, as the validity of either
had a consequential negating effect on the other. Appreciating the intent
of this commentary, it will be confined only to the construction aspects
since the legal commentary is presented separately.

This judgment is consistent with all the earlier judgments of the
Construction Court as well as those courts hearing such cases in respect
of similar issues, and therefore reaffirms the judiciary’s commitment in
ensuring that CIPAA meets its purposes as intended by the legislature.
In short, it reiterates the following principles of law and practice with
regard to the statutory adjudication of payment disputes:
(1) Jurisdiction of the Adjudicator

Pursuant to s 27(1) of CIPAA, the Adjudicator’s jurisdiction is
circumscribed, and confined to merely the Payment Claim filed
under s 5, and the Payment Response filed under s 6. In view of
this, the Adjudicator cannot stray beyond the confines of Claim
and Response (or, in short “Notices”).
Accordingly, any issue that was not raised, or “pleaded” in ss

5, or 6 Notices cannot be raised by either, or both parties later
in their submissions under ss 9 to 11, and if so raised, this can
be disregarded by the Adjudicator as it will be beyond his/
her jurisdiction. This is subject to the proviso of the parties
exercising their right to extend the Adjudicator’s jurisdiction
vide s 27(2) of CIPAA.
(2) Powers of the Court in Setting Aside

The power of the courts to “set aside” an Adjudicator’s decision
is limited by the express provisions of s 15 of CIPAA, and is based
157
merely on the four grounds as stated therein. Hence, for such

a challenge to be successful, it must be confined to these four
grounds which must be proved by the challenger. The courts are
reluctant to interfere if the Adjudicator either, failed to appreciate
the evidence, or even misconstrued the evidence before him/her,
or made a finding of fact which the court disagreed with. Even if
the Adjudicator was wrong, since an adjudication decision was
of temporary finality, it could be corrected later at a different
forum, such as arbitration. In the final analysis, so long as the
Adjudicator answered the right question even wrongly, it will be
enforced by the courts provided that it did not contravene the
provisions of s 15.

There was no necessity for the Adjudicator to give detailed
reasons in his/her decision, so long as they were sufficiently
cogent and clear. And the courts would be slow to conclude that
there had been a breach of natural justice, or that there had been
biasness, or lack of impartiality.

A Subcontractor’s obligations is to complete the works as stipulated and
any changes shall be considered a Variation Order.
Authorities approvals are always the Employer or Main Contractor’s

responsibilities to obtain and if Authorities requires further
amendments, these should be in the form of an Architect’s Instruction
to vary the works done and a Variation Order to follow with a price
adjustment if necessary.
If an Architect’s Instructions is not forthcoming, then the Subcontractor

can send a letter to the Architect to confirm in writing the variations
ordered, and which can be used to later support a construction claim.
158
Sungai Lui Construction & Development Sdn Bhd v Jati Estetika Sdn Bhd
Sungai Lui Construction & Development Sdn Bhd v

Jati Estetika Sdn Bhd
HIGH COURT, KOTA BHARU
CIVIL SUIT NO: 22–155–2010
AHMAD BIN BACHE JC
10 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 159
The Defendant was appointed by the Jabatan Kerja Raya ("JKR") Kelantan to
carry out construction and remedial works at a work site pursuant to a land
slide incident. Vide a letter dated 21 March 2009 (“Exhibit P7”), the Defendant
had appointed the Plaintiff as the main and sole subcontractor for the said
project. The Plaintiff claimed that they had orally accepted the appointment
on 21 March 2009 and had thereafter carried out the construction and
remedial works. Subsequent to the appointment, the parties had agreed to
prepare a Memorandum of Understanding (“MOU”) before the execution of a
Memorandum of Agreement (“MOA”) which could not at that time be prepared
yet since JKR had not determined the final contract sum for the said project.
Thus, the Plaintiff claimed that the agreement between the parties was based
partly orally, partly in writing and partly through conduct of the Plaintiff and
the Defendant. The Plaintiff further claimed that the Defendant had through
its letter dated 9 September 2009 (“Exhibit P17”) breached the contract by
wrongfully terminating the contract between the parties. The Plaintiff had
completed the works which it was supposed to carry out until that point of
time. The Plaintiff then claimed payment for the works it had carried out. The
Defendant claimed that the parties had not made any agreement orally. The
Defendant also denied having terminated the contract and claimed that it
had only issued the notice dated 9 September 2009 as a “stop work order” as
instructed by JKR. According to the Defendant, the Plaintiff had failed and refused
to carry out the project works. The following issues arose for determination: (i)
whether the contract between the Plaintiff and the Defendant was based on the
letter dated 11 March 2009 (“Exhibit P6”) with the contract sum not exceeding
RM3m or “final Contract Sum” of RM27,250,000.00 as per the letter dated 21
March 2009 (“Exhibit P7”); (ii) whether the contract between the Plaintiff and
the Defendant was wrongfully terminated by the Defendant; and (iii) whether
the Plaintiff was entitled to its claim.
Held, allowing the Plaintiff’s claim with costs:
(1) The Plaintiff had been officially appointed to carry out the said works.
Exhibit P7 overrode Exhibit P6. P6 was merely the initial offer from the
Defendant and was not accepted by the Plaintiff. Through P7, the Plaintiff
was appointed by the Defendant as the “Total Sub-Contractor”. Apart from
159
that, P7 had been issued on a later date and thus it was logical that the later
letter overrode the earlier letter. Furthermore, the scope of works under
P7 was wider compared to P6. Thus, it was not logical for the Plaintiff
to accept the same offer at the price of RM3 million only with a wider
scope of works. Thus, the contract between the Plaintiff and Defendant
was based on the contract sum of RM27,250,000.00.
(2) Although the MOU as agreed by the parties had not been executed, it
was still binding on the parties as the parties had acted upon the terms
as contained in the MOU. Further, it was put into Part A of the Common
Bundle.
(3) Based on Exhibit P7, both parties had agreed to prepare a MOU while
waiting for the MOA and that it would become part of the contract
binding on the parties. Although the MOU and the MOA at the end was not
executed, it was nevertheless binding on the parties because it had been
agreed upon and the Plaintiff had also acted upon the MOU.
(4) Although Exhibit P17 did not state specifically the termination of the
contract between the parties, nevertheless the fact that the Defendant did
not recall the Plaintiff to continue the works amounted to a termination.
There was also evidence to show that the Defendant had appointed a third
party to continue the Plaintiff’s works. Thus, the Defendant’s conduct
showed that the Defendant no longer intended to recall the Plaintiff for
the said works.
(5) With the Plaintiff’s denial that the Defendant had called upon the Plaintiff
to continue the works, together with no evidence being produced by the
Defendant to support its contention, the Defendant’s contention was
therefore not true. Further, the fact that the Defendant had ordered the
machinery to be removed from the site by itself meant that the Plaintiff
had to stop the works as it could not carry out the works without the
machinery. The contract between the parties had been wrongfully
terminated by the Defendant.
(6) The Plaintiff had carried out the agreed works until it was instructed to
stop work. Justice demanded the Plaintiff to pay fairly and accordingly. No
credible evidence had been led by the Defendant which could counter the
Plaintiff’s submissions on the amounts claimed by the Plaintiff.
_____________________________________
NOTE: The original judgment of this case is written in Bahasa Malaysia. In order to
standardise the language used in this publication, the summary of the case has been
translated into English.
160
COMMENTARY 1
by Datin Grace Xavier
Research Fellow, Faculty of Law, UM
Arbitrator & Mediator
Introduction
The case centred on the issue of appointment of the Plaintiff
(subcontractors) to carry out construction and remedial works
requested by the Defendant (main contractor). There was supposed
to be an agreed Memorandum of Understanding ("MOU") between the
parties which did not materialize in time. The Plaintiffs carried out
the works nonetheless based on the oral agreement, partly written
instructions, and the conduct of the parties. The Defendant then sent
a letter, purportedly terminating the services of the Plaintiff on the
grounds that the Plaintiff was not proceeding with the works diligently.
The Plaintiff, following the instructions of the Defendant, stopped all
work and claimed for works done to the date it received the termination
letter from the Defendant. The Defendant claimed that the letter was
not a termination letter but a “stop work order” claiming, inter alia,
that there was no agreement between the parties, and that the Plaintiff
had refused and failed to carry out the project works. The Defendant
had also appointed a third party to continue with the contract works.
Issues for determination were whether there was a contract between
the parties and if yes, was the contract determined wrongfully by the
Defendant?

The Court held that the Plaintiff had been officially appointed to carry
out the said works and hence entitled to payment. Although the MOU
had not been executed, the Court held that the document was still
binding on the parties and the Plaintiff had carried out the works as
contained in the terms of the MOU. Regarding termination, the Court
held that by not recalling the Plaintiffs to carry out the works, the
conduct of the Defendant was such that they no longer intended to
recall the Plaintiff to finish the works. By not recalling the Plaintiff and
by removing the machinery from the work site, the Defendant had not
allowed the Plaintiff to continue with the works. This conduct by the
Defendant amounted to a breach of the contract. Hence there was a
wrongful termination of the contract as the Plaintiff had continued with
the works until the “stop work order” had been issued by the Defendant.
It was only just that the Plaintiff had to be compensated fairly for the
works done. The fortunate thing in this case was that since there were
161
a number of letters passing between the parties, it clearly could be

evidenced that there was a contract that had come into existence.

The industry should ensure that their architects, engineers and quantity
surveyors (who may be appointed as contract administrators in various
projects) are adequately informed as to the law governing construction
contracts. Construction contracts are peculiar contracts in that they
are the only type of contracts that allow for variation of terms and for
variation of project works (subject to the scope of the original contract).
As such, contract administrators must know the limits of their job scope
and how much authority they possessed, as their actions will be binding
on their employers – the clients.
The contractors, on the other hand, should be advised by the

Construction Industry Development Board (“CIDB”), to ensure that
all instructions are clearly documented. The dangers of proceeding
with oral assurances must be pointed out during the refresher courses
conducted by the CIDB. This will ensure that the contractors, while
carrying out the works, are doing so with the added knowledge that
either they receive written orders, or if oral orders are given, then they
are to confirm such orders from their end and ensure that the other side
acknowledges that the oral instructions were in fact delivered.
162
COMMENTARY 2
by Sr Lim Kok Sang
CQS, FRISM, FRICS, MCIArb.
Principal, Sang QS Consult
Introduction
Following two landslide incidents in Kelantan, Jabatan Kerja Raya
(‘JKR’) awarded a construction and remedial works contract to the main
contractor before the scope and price could be determined and the main
contractor in turn appointed the subcontractor to carry out the whole of
the works on a similar basis.
The main contractor issued the first appointment letter with an offer
of a subcontract sum not exceeding RM3,000,000.00 and the second
appointment letter dated 10 days later stipulating that the subcontractor
was to prepare a Memorandum of Agreement (“MOA”) and that the
subcontract sum and scope was to be based on JKR’s approved drawings
and bills of quantities. The parties also agreed that a Memorandum of
Understanding ("MOU") would be prepared and form part of MOA to
bind the parties. The MOU in turn stipulated that the subcontractor
would complete the entire work on the main contractor’s behalf,
including appointing a third party who was already at site to carry out
temporary works. In return, the main contractor would assign the entire
right and ownership of all the sums receivable from JKR for the work,
minus 10% to be paid by the subcontractor to the main contractor as
project management fees.
The subcontractor claimed that the second appointment letter together

with the MOU prepared by the subcontractor, were accepted both orally
and by its commencement of work. Based on these, the subcontract
sum was subsequently determined to be RM27,250,000.00. The main
contractor contended that the subcontract sum of not exceeding
RM3,000,000.00 stipulated in the first appointment letter was binding,
whereas the second letter of appointment and the MOU were not
because the MOU was not signed.
The main contractor later issued a notice to stop work as instructed

by JKR. The subcontractor sued for payment on work done and alleged
that this stop work order and subsequent appointment of a third party
to continue with the subcontract works was termination by conduct
by the main contractor. The main contractor denied the allegation and
argued that the notice was not a termination notice but a stop work
order instead. The main contractor further claimed that it was the
subcontractor who had failed and refused to proceed with the works
163
instead when instructed to do so. The learned Judge allowed the

subcontractor’s claim with costs.
Two issues were considered in this case: (1) Whether agreements are
binding if not signed; and (2) Whether contracts can be terminated
by conduct. The learned Judge found, in line with trite law, that: (a)
the terms of conditions stipulated in the second appointment letter
overrode that of the first letter of appointment because it was issued
later and provided for a wider scope; and even though not accepted in
writing and signed, the MOU was binding because they were agreed and
acted upon by the parties; (b) the stop work order issued together with
the subsequent conduct of the main contractor amounted to wrongful
termination of the subcontract.

It is common for parties to postpone the preparation and signing of
agreements due to various reasons. Whilst it is sometimes difficult
for parties to commit in writing in the presence of uncertainties, the
lesson learnt from this case is that it is in the parties’ best interest to
put in writing terms and conditions which are certain and record how
the said uncertainties are to be dealt with in time. It is also prudent
to communicate in writing any disagreement on terms and conditions
put forth by the other party as silence and subsequent conduct may be
construed otherwise.

It sounds elementary, but the best practice to be adopted when entering
into any contract is always to ensure there is either certainty or a
method to achieve certainty stipulated in the contract for the following:
(i) Time. When is the work to be completed?

(ii) Scope. What is to be completed?; and
(iii) Price. How much is to be paid for work completed?
As demonstrated in this case, the parties did not have clarity nor
agreement on a method to finalise the contract sum and scope of work.
This encouraged unnecessary speculation and conflicting interpretation
between the parties of their respective contractual duties and
responsibilities, which finally led to dispute. All these could have been
easily avoided if not for the lack of certainty in both Scope and Price.
164
Target Resources Sdn Bhd v Putrajaya Holdings Sdn Bhd
Target Resources Sdn Bhd v

Putrajaya Holdings Sdn Bhd
HIGH COURT, SHAH ALAM
CIVIL SUIT NO: 22C–14–07/2015
SEE MEE CHUN J
29 JULY 2016
_________________________
[2017] 1 CIDB-CLR 165
The Plaintiff had entered into a contract with the Defendant for a building
construction project (“the project”) pursuant to a letter of award (“LOA”) dated
22 June 2012. According to the LOA, the completion date of the project was
15 March 2014. However, by a letter dated 15 October 2014, the Defendant
agreed to extend the completion date to 31 December 2014 subject to the
Plaintiff remedying three (3) defaults. A notice to remedy the defaults dated
11 December 2014 was also issued by the Defendant. Subsequently, the
Defendant issued its notice of termination dated 9 February 2015 terminating
the Plaintiff’s employment forthwith. The Plaintiff sued the Defendant and
claimed: (i) the value of work done of 25.42% amounting to RM16,629,764.00;
(ii) the sum of RM3,271,000.00 under a bank guarantee (BG) called upon by
the Defendant; and (iii) a declaration the notice of termination was invalid. The
Defendant disputed the claim and counterclaimed for (a) costs of completion;
(b) indemnity for further costs in completion; and (c) indemnity for late payment
charges payable by the Defendant to its purchasers. The Plaintiff contended
that its claim arose from the physical completion of work at 57.62% but having
been paid an equivalent of 32.20% (amounting to RM20,011,654.00) thereby
leaving a balance of the equivalent of 25.42% unpaid. The Defendant explained
the correlation between percentage of physical work done versus percentage of
total contract sum contending that physical and financial do not fall in the same
path and that payment was certified based on work done.
Held, dismissing the Plaintiff’s claim with costs and allowing the Defendant’s
counterclaim:
(1) The Plaintiff had been paid RM20,011,654.39 and this was in fact the
sum total of all invoices submitted. However, the percentage of physical
completion did not translate into an equivalent percentage of contract
value. The percentage of physical work was distinct from value of work
in a high end project such as this project where the finishing was high
ended in terms of monetary value and so even if 55% was completed, the
value may be RM20 million and if the job had been completed the Plaintiff
would have got the full amount. There was therefore no underpayment
for work done more so when the Plaintiff had been paid the amount as per
its invoices.
165
(2) The evidence was clear that the Plaintiff did not complete the works by
the original completion date of 15 March 2014 or the revised completion
date of 31 December 2014. The Plaintiff had not remedied the defaults.
Even by the Plaintiff's own pleaded case it had only completed 57.62%
of the works. Under the circumstances, the Defendant was entitled to
issue the notice of termination and it was legal and valid. Clause 59 of
the contract entitled the Defendant to terminate when the Plaintiff had
committed default in any one or more of the defaults as stated in that
aforesaid clause. Here the Plaintiff had failed to proceed regularly and
diligently with the Works and failed to execute the Works in accordance
with the contract which was the timeline as given by Defendant. The
issue of unilateral termination and its willingness to continue does not
therefore arise.
(3) The cause of delay was attributed to financial problems. As observed in

Sutcliffe v Chippendale & Edmondson 18 BLR 149 at 161 and 162, when the
contractor had neither the ability, competence nor the will to complete
the work, the Plaintiff was justified in determining the contract. The same
went for this instant case where the Plaintiff had not shown its ability or
competence to complete the work, having only completed 57.62% of the
work on the revised completion date. Financial reason was nevertheless
not a ground for extension of time.
(4) Hence with the valid termination of the contract, the Defendant was
entitled to call upon the BG.
(5) The Defendant was required to appoint third party contractors to

complete the uncompleted works by the Plaintiff. The Defendant had
proved the third party costs through the letters of award to the respective
contractors. The challenge mounted by the Plaintiff was the excessive
costs. After considering the evidence, the Court found it to be not excessive
given the difference in construction costs in 2012 and 2015 and that
rescue contractors would cost more due to the need to accelerate work.
(6) Despite the Plaintiff’s challenge on the increase in prices for the contract
entered between the Defendant and the third party contractors, the
Plaintiff had not produced any evidence i.e. a quotation from other
third party contractors, report from professional independent quantity
surveyor to show the contract sums were in any way unreasonable.
(7) On the claim for the losses suffered by the Defendant in compensating its
purchasers for late delivery, clause 13 of the LOA provided that the Plaintiff
shall indemnify the Defendant for all damages and losses suffered by the
Defendant due to the Plaintiff's breach or default. Also, pursuant to the
Defendant’s S&P with the purchasers there was a provision for damages
for late delivery. The Plaintiff was thus liable for the damages incurred by
Defendant.
166
(8) Further in the course of revising the completion date to 31 December

2014, the Defendant had, in its letter dated 15 October 2014, inserted an
indemnity condition provision which was to include late payment charges
to purchasers. This had been acknowledged and accepted by the Plaintiff
as evident in a Supplemental Letter to the Agreement. Pursuant to this
Supplemental Letter to the Agreement, the Plaintiff had in fact agreed to
indemnify the Defendant in full and at all times against the late charges
payable to the Defendant’s purchasers by reason or as a result of or arising
from the revised completion date on 31 December 2014.
COMMENTARY 1
by Huganeswaran Veerasagram
Senior Case Counsel
Introduction
This case concerned a contractual dispute between the parties – the
Plaintiff was the contractor and the Defendant was its employer. Despite
the Plaintiff’s failure to complete construction by the stipulated date,
the Defendant had agreed, subject to the Plaintiff remedying three
defaults, to an extension of completion time. The Defendant had also
issued a notice to remedy defaults before subsequently terminating
the contract by way of notice. Thus, the Plaintiff sued the Defendant,
claiming for: (1) value of work done on the basis that it had been paid
a lesser sum for the physical completion of work; (2) a sum under the
bank guarantee called upon by the Defendant; and (3) a declaration that
the notice of termination was invalid. On the other hand, the Defendant
counterclaimed for: (a) costs of completion; (b) indemnity for further
costs in completion; and (c) indemnity for late payment charges payable
by the Defendant to its purchasers. The Court dismissed the Plaintiff’s
claim with costs and allowed the Defendant’s counterclaim.

With respect, although the case did not establish any ground-breaking
legal principles, the Court nevertheless arrived at its finding based on a
pragmatic, and commercially efficacious approach as discussed below.
(i) Percentage of physical completion does not equate to a similar

percentage of contract value
The Plaintiff’s claim arose from the fact it had physically
completed 57.62% of the work, but only received an equivalent
payment of 32.20%, leaving a balance of 25.42% amounting to
167
RM16,629,764.00 that was due to it. The Defendant disputed this

head of claim on the basis that the high-end nature of the project
meant that the construction of the building itself was lesser
where monetary value was concerned, and that the finishing
was the component that significantly added value to the project.

The Court found that the percentage of physical completion did
not translate into an equivalent percentage of contract value;
agreeing with the Defendant’s submission that the percentage
of physical work is distinct from the value of work in a high end
project where the finishing is high-end in terms of monetary
value.
Furthermore, the Plaintiff had not been underpaid. The payment

made to it was in accordance with the invoices it had submitted.
Neither had it challenged the valuation of works done. Thus, the
payments made to the Plaintiff were correct, and in accordance
with the work it had done.
(ii) Termination according to contractually stipulated circumstances

is perfectly valid
The Court found clear evidence that the Plaintiff had failed
to complete the works, both by the original and the revised
completion dates. Also, it had not remedied the defaults and
had itself admitted to only completing 57.62% of the works. As
a result, the Defendant’s termination was valid, given that the
contract contained clauses allowing termination in the event of
the Plaintiff’s default. Consequently, the Defendant was entitled
to call upon the bank guarantee as provided in the contract.
(iii) The inability and incompetence of a party to perform its

contractual obligations would justify contractual determination
Contractual provisions aside, See Mee Chun J also noted the
leading judgment in Sutcliffe v Chippendale & Edmonson 18
BLR 149 whereby the Court had observed that the inability,
incompetence or lack of will on the part of the contractor were
justifications for the other party’s determination of the contract.
The same principle applied here. Notwithstanding the revised
completion date, the Plaintiff had only partially completed the
work required. Thus, the Plaintiff had not shown its ability or
competence to fulfil its obligations.
(iv) Financial reason not a ground for an extension of time

In holding that financial reasons did not justify an extension
of time, the Court noted a contractual provision, under which
168
the contractor had provided a warranty in relation to its ability

to fulfil any financial obligations that arose in performing the
contract.
(v) Any allegation made must be supported by concrete and credible

evidence
The Plaintiff had disputed the Defendant’s counterclaim for
the costs of completing the project; it sought to argue that the
increase in prices for the contract entered between the Defendant
and third party contractors were excessive and unreasonable.
However, the Court disagreed with the Plaintiff and held that it
was liable for such costs.

In arriving at its holding, the Court considered the increment in
construction costs between the time of contract formation (in
2012 between the parties to the present suit) and the period
when the completion works were undertaken. In addition, the
fact that the work had to be accelerated leading to higher costs
was also taken into account.
More crucially, the Court noted the Plaintiff’s lack of evidence to

sufficiently show that the contract sum sought by the Defendant
was unreasonable. Specifically, the Plaintiff had not obtained
quotations from other third party contractors or procured
reports from professional independent quantity surveyors to
show that the contract sum was unreasonable. On the other
hand, the Defendant had adduced evidence by way of letters of
award, and provided a breakdown of expenses to justify the sum
claimed.
(vi) Contractual allocation of risk

In addition to the costs of completion, the Plaintiff was made liable
in respect of losses suffered by the Defendant in compensating its
purchasers for late delivery. The Court highlighted the particular
contractual provision, and the Plaintiff’s own agreement as
stated in the Supplemental Letter to agreement, both of which
applied to indemnify the Defendant against damages and losses
suffered due to the Plaintiff’s breach or default.

In light of the principles enunciated above, parties are advised to
perform its contractual obligations to the best of their abilities. It
is evident that the Court will strive to give full effect to the parties’
intentions as embodied in the contract. This approach is grounded in
respect for the doctrine of freedom of contract which allows parties to
169
provide for terms and conditions that will govern their relationship.
Furthermore, the law assumes that parties enter into contracts of their
own volition, and would conduct negotiations between them as to the
allocation of commercial risks. Thus, save under limited circumstances,
any court ought and will be slow to arrive at a finding which blatantly
contradicts an express contractual provision.
Moreover, the burden of proof is on the party alleging a particular fact

or set of circumstances, to furnish adequate and sufficient evidence in
support of its contention. This is a fundamental element of the law of
evidence, which applies whether in civil or criminal cases. Therefore, a
party will only succeed in controverting or disputing a particular claim
made by the opposing party, if the party is able to prove the contrary
position by adducing concrete and credible evidence.
170
COMMENTARY 2
by Sr Ong Hock Tek
FCIOB, FRICS, FCInstCES, FCIArb,
FSIArb, FMIArb, FMSAdj, FRISM, ICECA
Arbitrator, Adjudicator, Mediator,
Reg. QS, Cert. Constr. PM
Managing Director
BK Burns & Ong Sdn Bhd/Entrusty Group
Introduction
This case involved a contractor (“the Plaintiff”), who entered into a
construction contract with the Employer (“the Defendant”) for the
construction and completion of a high end housing development
project in Putrajaya, at a contract sum of RM65.420 million in 2012.
The Defendant had terminated the contract with the Plaintiff on three
grounds, one of which being failure to proceed regularly and diligently
with the Works. The Defendant thereafter proceeded to call upon the
bank guarantee and engaged another contractor to complete the said
Works accordingly. The Plaintiff commenced its legal action in the
High Court, alleging that its termination was invalid and claimed for its
balance of payment for work done equivalent to 25.42 %, amounting
to RM16,629,764. It contended having progressed to 57.62% physical
work completion, but having been paid only RM20,011,654, equivalent
to 32.20%, which the Defendant denied. The Defendant counterclaimed
for costs of completion, indemnity for further costs in completion
and indemnity for late payment charges payable by Defendant to its
purchasers. The Court dismissed the Plaintiff’s claim and allowed the
Defendant’s counterclaim.

In this case, the Plaintiff had claimed that the Defendant’s termination
of the contract was invalid. The Court held that it was valid as the
Defendant had rightfully served its notice of termination after its notice
to the Plaintiff to remedy its defaults, which the latter failed to do so.
Termination/Determination is a serious matter, often with grave

consequences, in particular financial. One must therefore be careful
and knowledgeable when deciding to terminate a contract when
alleging that the termination is invalid or wrongful. Such drastic action,
if exercised under a construction contract, must adhere strictly to the
termination/determination provision and procedures.
171
On progress of the Works, there was a substantial difference between

physical and financial progress percentage claimed, including purported
back loading by the Plaintiff but this was denied by the Plaintiff’s project
manager. The Court held that percentage of physical completion is not
equivalent nor corresponds to percentage of contract value.
The physical and financial progress percentage is often an issue of

dispute in the construction industry. This is further compounded by the
lack of appreciation and understanding of cash flow, S-Curve and works
programming methods, which are prevalent practices. One needs to
appreciate that physical work progress percentage is usually related to
the quantity of works, whereas financial progress percentage depends
on the value of the progressed item/s. A typical example would be M &
E works, whereby equipment costs may far outweigh the physical works
involved. Consequently, good understanding and careful assessment
of physical progress and financial evaluation need to be made prior
to any attempt to correlate the two parameters, which often result in
differences, both percentage and value.
On extension of time, although the Plaintiff had pleaded that the delay
was attributed to financial problems, it had applied for extension of
time due to certain variation works, but these were found not to be in
the critical path, hence no extension was granted. The Court held that
although the cause of delay was due to the Plaintiff’s financial problems,
it had contractually warranted having adequate and proper finance to
meet all financial obligations under the contract. Consequently, financial
reason was not a ground for extension of time.
Financial constraint/problem is often cited by contractors

(subcontractors too) for delay in its works progress. However, this
is not a valid reason or ground for extension of time under most
construction contracts. Most standard forms of construction contract
and even bespoke contracts have relevant extension of time provision
and procedures, which contain valid reasons/grounds for granting
of extension of time. They must be complied with accordingly if the
contractor in delay needs the extension of time to be considered and
granted by the Superintending Officer of the project, failing which, the
consequence of liquidated damages imposition, may be inevitable.
In completion of the remaining Works following the termination, the

Defendant had counterclaimed total costs of RM59,634,956.60 and GST
for the works completed by the third party contractor. The Plaintiff
contended that it was excessive (i.e. exceeded by RM14.2 million, plus
GST), but the Court held otherwise, given the increase in construction
costs and that the third party or rescue contractor costs more due to the
nature of the remaining Works.
172
In a peculiar move, in agreeing to revise the completion date, the

Defendant had inserted an indemnity condition for late payment charges
to purchasers in a Supplemental Agreement, which was executed by the
Plaintiff. The Court held that this Agreement was enforceable since the
Plaintiff had agreed to indemnify the Defendant in full and at all times
against the late charges payable to the purchasers due to the revised
completion date.

It is common that when faced with termination/determination,
decisions need to be made by the Employer and Contractor whether
to proceed or allow it respectively or otherwise to settle the matter
amicably through negotiation and mutual agreement or to continue
with the remaining works. Serious consideration needs to be given to the
impact or implications arising from the termination/determination, in
particular further disruptions, delays and costs increase in completing
the remaining works, eventually. Sometimes, it may be a better decision
to commercially allow for more time (ex gratia, if need be) for the
contractor in culpable delay to complete the remaining works, if it is
still capable of doing so, rather than to strictly follow the books so to
say. This is especially so, when the works is substantially completed i.e.
more than ninety percent complete.
It is also common in the industry for contracting parties to come to

certain arrangement/s, leading to supplemental agreement/s to the
contract. Often these supplemental agreements involve contractual
and/or commercial issues, which may include variations, extension
of time or revised date/s, loss/expense, payment, contra property in
lieu of payment, change of use or scope, etc. One needs to understand
and be cautious about entering into such supplemental agreement/s,
as they often vary and/or deviate from the original contract terms and
conditions. The implications can be far reaching, as in this case.
173
Teknojaya Construction Sdn Bhd v Telliana

Plantations Sdn Bhd
HIGH COURT, SIBU
CIVIL SUIT NO: MYY–22–13/6 OF 2013
LEE HENG CHEONG J
15 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 174
The Plaintiff entered into an agreement (“the Agreement”) with the Defendant
for the construction of two (2) stores and two (2) blocks of workers’ quarters
for a lump sum price of RM1,772,000 at the Defendant’s oil palm estate.
Subsequently, the Plaintiff issued a letter of demand to the Defendant stating
that it had completed the first store for the Defendant and that the Defendant
had failed to hand over the construction site for the balance of the works to the
Plaintiff with piling works completed for construction of the workers’ quarters.
The Plaintiff also complained that the scope of work for the workers’ quarters
was absent and/or omitted from the said Agreement until the said Agreement
had lapsed. Despite the Plaintiff’s demands for the construction site to be
handed over to the Plaintiff, the Defendant failed, refused or neglected to do so.
The Plaintiff thus demanded and claimed against the Defendant, inter alia for
the payment of the balance of the contract sum of RM1,222,000 for breach of
the said Agreement by the Defendant. The Plaintiff’s position was: (i) that the
Defendant had failed to hand over the construction site for the second store to the
Plaintiff until the contract period lapsed because the Defendant was undecided
as to the exact location of the second store; and (ii) that the Defendant had failed
to carry out piling works for the workers’ quarters which was not within the
Plaintiff’s scope of work under the said Agreement. The Defendant, on the other
hand complained of various defects appearing on the first store constructed
by the Plaintiff and also complained that the construction of the store was
delayed, occasioning loss to the Defendant. The Defendant thus counterclaimed
against the Plaintiff, inter alia for: (a) a declaration that the Agreement had
been terminated in accordance with the terms of the Agreement; (b) special
damages for the total loss of the first store; and (c) damages reckoned on a daily
basis for the delay in construction of the store. The Defendant’s main defences
to the Plaintiff’s claim were: (a) that the Plaintiff had voluntarily abandoned
the work site until the contract period for the construction of the second store
had lapsed; and (b) the Plaintiff had failed to carry out piling works for the
workers’ quarters which were within the Plaintiff’s scope of works under the
said Agreement.
174
Teknojaya Construction Sdn Bhd v Telliana Plantations Sdn Bhd
Held, allowing the Plaintiff’s claim but dismissing the Defendant’s counterclaim,
with global costs to the Plaintiff:
(1) The Agreement was a fixed lump sum contract for the sum of RM1,772,000
namely RM550,000 for each store and RM56,000 for each workers’
quarters. The prices included the Plaintiff’s cost of labour and material
and the said Agreement did not allow or provide for any variation of
works or price of materials.
(2) The various correspondences between the Plaintiff and the Defendant
were relevant and the Defendant did not bother to reply to any of the
correspondence which the Plaintiff had sent to the Defendant from July
2012 until December 2012.
(3) From the evidence adduced it was found that the new site for the second
store was in fact never identified or handed over by the Defendant to the
Plaintiff until after the Plaintiff completed the construction of the first
store and handed over the same to the Defendant. This was confirmed by
the letter dated 12 November 2012 (Exhibit P19) which showed that the
Defendant had yet to identify the site for the second store that was to be
constructed by the Plaintiff.
(4) It was the duty of the Defendant to identify and hand over the site for the
second store to the Plaintiff especially since the Defendant had decided
not to build the two (2) fertilizer stores side by side but on different
locations in the plantation. It would have been reasonable to expect the
Defendant to write to the Plaintiff, to inform the Plaintiff of the new site
where the construction of the second store was to be done especially
since the Defendant had decided not to construct the two (2) stores side
by side as originally agreed. However, there was no such correspondence
by the Defendant to the Plaintiff. Thus, the Court could only conclude that
the Defendant did not inform the Plaintiff about the site of the second
store. The Defendant had thus breached the said Agreement when it
failed to identify and hand over the site where the second store was to be
constructed by the Plaintiff, entitling the Plaintiff to treat the contract as
at an end. The failure to hand over the site for the second store amounted
to a fundamental breach of the Agreement.
(5) Based on the examination of the said Agreement, the quotations annexed
to the said Agreement as well as the work scope under the said Agreement
and the examination of the various letters written by the Plaintiff to the
Defendant, it was found that the work scope for the workers’ quarters
was omitted from the said Agreement and was therefore not within the
Plaintiff’s work scope under the said Agreement. The Defendant had
failed to complete the piling works for the workers’ quarters even after
the completion and handing over of the first store by the Plaintiff or even
before the Plaintiff removed the balance of the construction materials
from the first store.
175
(6) Since the Defendant could not hand over the construction site of the
workers’ quarters to the Plaintiff as the Defendant failed to complete the
piling works for the workers’ quarters prior to the Plaintiff commencing
the construction of the workers’ quarters, it amounted to a fundamental
breach of the said Agreement entitling the Plaintiff to treat the said
Agreement as at an end. The Defendant did in fact award the construction
of the workers’ quarters to another contractor instead of to the Plaintiff
thus being in breach of the said Agreement with the Plaintiff.
(7) If the Plaintiff had not completed the first store on time and properly the
Defendant would not have made full payment for the first store to the
Plaintiff and the Defendant had never before made any complaint as to
delay.
(8) The Defendant’s counterclaim contradicted the Defendant’s contention

that the first store was never handed over to it. Further, there were
contemporaneous documentary and photographic evidences to show
that the Defendant’s allegation that the first store had not been handed
over was simply without basis.
(9) The Defendant’s expert report was inadmissible after objections from the
Plaintiff as the Defendant failed to call the maker to give evidence at the
trial on its admissibility and contents. Since the Defendant’s expert report
was ruled inadmissible, the Defendant was unable to prove the causes of
the failure of the first store. As such the Defendant’s entire counterclaim
would fail because the Defendant would not be able to rely on any expert
evidence to show that the failure of the first store was attributable directly
to the Plaintiff. The Court would accept the testimony of the Plaintiff’s
expert, PW2, who relied on the Defendant’s expert report which stated
that the Plaintiff was not to be blamed for the defects or the settlement of
the first store as his testimony was not challenged or rebutted in his cross
examination.
(10) Based on the evidence adduced, none of the Defendant’s witnesses could
prove that the Plaintiff’s piling works for the first store were improper
or insufficient. Therefore, based on the evidence of the Defendant’s
witnesses alone, the Court would find that the Defendant had failed to
prove that the piling works carried out for the store by the Plaintiff were
inadequate or insufficient or defective. In any event the High Court was of
the view that the issue of improper, insufficient or defective piling raised
by the Defendant ought to be rejected by the Court because the issue was
never pleaded by the Defendant in its Defence and Counterclaim and was
thus an afterthought.
(11) The Plaintiff was not liable for the said defects to the store because the
Defendant failed to prove the cause of the defects, ie whether the defects
were attributable to the Plaintiff such as the allegation of defective piling
176
made against the Plaintiff. Further, the Plaintiff was fully paid by the
Defendant after the works relating to the first store were carried out to
the satisfaction of the Defendant.
(12) The Defendant’s claim for Liquidated and Ascertained Damages (“LAD”)
against the Plaintiff was without basis and merits and the Court would
accordingly dismiss such claim. The Court also dismissed the Defendant’s
counterclaim for general damages and/or losses as no evidence of
such losses were adduced or proven during the trial. The Defendant’s
counterclaim had no merit, was without basis and ought to be struck out
because the Defendant had failed to prove that the defects or settlement
of the first store occurred within the 6 months’ defect liability period or
was caused by the Plaintiff’s poor workmanship, use of sub-standard
materials or due to its substandard design.
(13) The Plaintiff was entitled to claim for damages for breach of the said
Agreement against the Defendant since the Defendant had committed a
fundamental breach of the said Agreement by failing to award the balance
works to the Plaintiff under the said Agreement. The Plaintiff had proved
its case against the Defendant on a balance of probabilities.
COMMENTARY 1
by Karen Ng Gek Suan
Partner at Azman, Davidson & Co
Adjudicator
Introduction
This case concerned a claim by the Plaintiff (contractor) against the
Defendant (employer) for damages for the Defendant’s breach of
contract between them (“the Contract”). The Plaintiff was appointed
by the Defendant to construct the following for a lump sum price of
RM1,772,000.00:
(1) 2 units of stores; and
(2) 2 blocks of workers’ quarters (which consisted of 6 units per
block).
The Plaintiff had completed and handed over to the Defendant the first
unit of store (“First Store”), where full payment had been made. There
is no issue regarding this.
177
The Plaintiff’s complaint is that the Defendant had failed to hand over
the construction site for the balance works to the Plaintiff (including
the complete piling works for the 2 blocks of workers’ quarters (“Piling
Works”). The Plaintiff contended that the Piling Works were not part of
the Contract works and was to be carried out by the Defendant, which
the Defendant failed to do so. These were denied by the Defendant.
In its defence, the Defendant contended that the Plaintiff had abandoned
the work site and that the Plaintiff had failed to carry out the Piling Works
which was under the Plaintiff’s scope of works under the Contract.
The Defendant also raised issues of defects and delay on the completion of
the First Store. The Defendant counterclaimed/sought for a declaration
that the Contract had been terminated by the Defendant under clause
14 or 15 (which provides the Defendant the entitlement to terminate
the Contract at any time without compensation to the Plaintiff and the
Plaintiff be paid for the actual work done). The Defendant also claimed
for amongst others, special damages for its total loss of the First Store
and liquidated damages for the alleged delay.
The Court held as follows:

(a) That the Defendant had in breach of the Contract, failed to
identify and hand over the site where the second store was to be
built by the Plaintiff;
(b) That the Piling Works are not within the Plaintiff’s scope of
works under the Contract and were to be carried out by the
Defendant, which the Defendant failed to complete even after
the Plaintiff had completed and handed over the First Store to
the Defendant or even before the Plaintiff removed the balance
of the construction materials from the First Store;
(c) That the Defendant did in fact award the construction of the
workers’ quarters under the Contract, to a third party contractor,
thus being in breach of the Contract;
(d) That the Defendant had committed fundamental breach of the

Contract by failing to award the balance works to the Plaintiff
under the Contract;
(e) Based on the foregoing, the Court allowed the Plaintiff’s claim
and granted damages for the breach, to be assessed by the
Registrar;
178
(f) On the counterclaim, the Defendant’s complaint of delay of

the completion of the First Store was never raised during the
contemporaneous time. In fact, the Defendant had made full
payment of the First Store to the Plaintiff after the completion
without such contention. This in the Court’s view, was an
afterthought;
(g) That the Defendant’s counterclaim contradicted the Defendant’s

contention that the First Store was never handed over to
it. Further, there were contemporaneous documentary and
photographic evidences to show that the Defendant’s allegation
that the First Store had not been handed over to them was
without basis;
(h) That the Defendant’s expert report on defects of the First Store
was inadmissible as the Defendant failed to call the maker to
give evidence at the trial on its admissibility; and
(i) In the circumstances, the Defendant has failed to prove the

counterclaim on the balance of probabilities and the Defendant’s
counterclaim was dismissed.

(i) In this case, the Court held that it was established from evidence
that the Defendant did in fact awarded the construction of the
workers’ quarters to another contractor instead of the Plaintiff,
thus being in breach of the contract with the Plaintiff. Now, there
were provisions under the Contract which entitled the Defendant
(employer) to halt any works contracted to the Plaintiff at any
time without reasons and payment would have been made to
the Plaintiff based on actual work done by it or the Defendant
could also terminate the Contract without compensation. The
Defendant could have exercised its entitlement under such
clauses and terminated the contract before awarding the scope
of the Plaintiff’s works to the third party. Should this have been
done, the Defendant would not be in breach of the Contract and
this suit by the Plaintiff against the Defendant could have/may
been avoided.
(ii) Another takeaway from this case is that the Court had dismissed
the Defendant’s counterclaim on defects of the First Store on a
technical basis, i.e. its expert report providing expert’s evidence
on the cause of defects was inadmissible in Court as the maker
had not been called. There are various ways to overcome such.
Amongst others, what may be done includes the party relying
179
on the expert report to engage another expert to provide his/

her independent opinion by reviewing the report tendered.
Alternatively, a new expert report on the defects may be
tendered.
(iii) A further takeaway from this case is that the Court in arriving at
its decision against the Defendant, had placed great weightage
on the fact that Defendant did not respond to all the letters
issued by the Plaintiff to the Defendant on the issue in dispute
for a consecutive period of 5 months. In this connection, the
completion period of the project provided under the Contract
was also a total period of 5 months. The Court appeared to be
convinced of a nonchalant attitude by the Defendant in the course
of the project. The outcome of the trial could have been different
if the Defendant had at least responded to the Plaintiff’s letters
and allegations made by the Plaintiff therein or at least provided
any evidence or explanation to the Court for its non-response/
lack of documentary evidence.

Following the lessons learnt above, it is important for parties to
construction contracts to focus on the adequacy of correspondence and
documents produced in projects. Proper records of all aspects of the
project must be made. Parties to a construction contract should always
address/reply to correspondences and/or issues that arise during the
course of the project and record their positions. The lack of response
documented/recorded is an immediate recipe for downfall in litigation/
dispute resolutions, as amongst other reasons, there is no evidence/
proof of what took place. When there is competing oral evidence on an
issue, the Court is likely to lean towards the party who is able to provide
contemporaneous documentary evidence that supports its position.
Perhaps if time does not permit for formal letters to be drafted and
issued, the minimum that needs to be done would be to send a brief
email.
180
COMMENTARY 2
by Steven Shee
Introduction
The case concerned an agreement (“Agreement”) between the Plaintiff
and the Defendant for the construction of two fertilizer stores and two
blocks of workers quarters.
The Plaintiff claimed for payment of the balance of the contract sum for
breach of the Agreement by the Defendant and that:
(1) the Defendant had failed to hand over the construction site for
the second store and the two blocks of workers quarters to the
Plaintiff until the Agreement lapsed because the Defendant was
undecided as to the exact location of the second store; and
(2) the Defendant has failed to carry out piling works for the
workers quarters which was not within the scope of work under
the Agreement.
The Defendant’s main defences to the Plaintiff’s claims were that:

(a) the Plaintiff had voluntary abandoned the work site until the
contract period for the construction of the second store had
lapsed; and
(b) the Plaintiff had failed to carry out piling works for the workers’
quarters which was within the Plaintiff’s scope of works under
the Agreement.
The Defendant counterclaimed against the Plaintiff for:

(i) a declaration that the Agreement had been terminated in
accordance with the terms of the Agreement;
(ii) special damages for the total loss of the first fertilizer store; and
(iii) damages reckoned on a daily basis for the delay in the
construction of the store.
In this case the Court allowed the Plaintiff’s claim and dismissed the
Defendant’s counterclaim with costs.

The case reflects a typical scene in the construction industry from site
possession to completion and handing over of a project.
181
One common pitfall is the failure to maintain contemporaneous records

in contract management or possessing inadequate records. What
needs to be done? Ensuring communications are made within specified
timelines or reasonable timelines from commencement to completion.
Recording events, particulars, time and cost as the project progresses
are important as all such records may be used for substantiating and
corroborating a particular matter.
On the facts there was lack of information from the Defendant regarding
the site for the new store and works scope. Not only did the Defendant
not inform the Plaintiff about the site of the second store, the Defendant
failed to identify and hand over the site where the second store was to
be constructed by the Plaintiff. In this case failure to hand over the site
for the second store amounted to a fundamental breach of agreement.
It follows that if one is not given complete site possession or any part
thereof, it is necessary to notify and keep records of the extent of the
site possession given and delay caused thereby, to be entitled to an
extension of time and cost as may be allowed under the contract.
The case, amongst others, touched on expert report, damages and

pleadings. Furthermore, if there is an expert report to be tendered, it is
important to call the maker to give evidence.
On claims for liquidated and ascertained damages and/or general

damages and/or losses, it must be remembered that such damages have
to be proven, failing which it may be dismissed. Actual loss depending
on the facts of each case has to be calculated and proven to enable one
to be reasonably compensated.
The case touched on the importance of pleadings. The Court was of

the view that the issue of non-handing over of the first fertilizer store,
fabrication of letters, improper, insufficient or defective piling was never
pleaded by the Defendant in its defense and counterclaim and was thus
an afterthought. Parties are bound by their pleadings and it is important
to include all possible claims in the claim and defense and counterclaim
for issues to be put forth for a decision.

Whether or not one can succeed in one’s claims against the other
boils down to the documents maintained. Failure to have proper
documentation will lead to adverse consequences to the warring
parties, more so in “documents only” dispute resolution proceedings.
Parties must keep proper records to aid the success of a claim
or a defence and/or counterclaim and/or amicable settlement.
182
Proper documentation and good contract management are paramount

at every stage of a project pertaining to but, not limited to site possession,
change in work scope/variations, handing over of completed works,
employer having beneficial use of the completed works, tests carried
out upon completion, payment, etc, to prevent any adverse effects. A
record of timely notification, responses, transmittals are required
for the good of a project. It is good practice to set out the lines of
communication between the parties and the authority limits of persons
representing the parties from the outset. A good forum would be the
kick off meeting. Commence by cleaning up one’s act by having better
contract management and documentation. Needless to say, documents
and records are meaningless if they are not stored and easily retrievable.
In defects management, there must be timely notification and making

good the defects within the stipulated time in the contract or such time
mutually agreed upon. The root cause of the defects is to be identified,
remedied, inspected and closed with documents.
It is also important to know the type of contract (i.e. a lump sum contract
or a provisional contract or a turnkey contract) and the scope of works,
commencing from the early stages of tender, contract and post contract
management in order to avoid or minimize the incidence of similar
negative occurrences.
Site possession has to be given to a contractor to enable construction

works to proceed, failing which one party may be entitled to treat the
contract as ended and giving rise to various claims such as delay, loss
and expense. Handing over of the site has to be dealt with care and with
adequate planning and if non-handing over or partial handing over
of the site cannot be avoided, there has to be in place provisions for
reasonable compensation for time and cost.
183
UEM Construction Sdn Bhd v Sun-Trident Sdn Bhd

CIVIL APPEAL CONSTRUCTION NO: 12BC–8–012/2014
23 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 184
The Appellant/Defendant was the main contractor for a construction project.

The developer of the project was Faber Union Sdn Bhd (“FUSB”). The Appellant
appointed the Respondent/Plaintiff as a subcontractor to supply and install
tiling and water proofing work for the project. The Respondent claimed that
it had been requested by the Appellant to carry out additional works at the
site to the value of RM202,117.55. This included a claim of RM38,640.00
“for the supply of labour only to install soap holders and paper holders”
("item 8"). The Appellant had paid a sum of RM30,502.50 for item 8 leaving a
sum of RM171,615.05 outstanding. The Respondent commenced this action to
claim the said sum. The Appellant on the other hand denied that the Respondent
had carried out the additional work contending that the additional works were
rectification works of the Respondent’s own defective work. The Appellant
further claimed that pursuant to negotiations, the parties had agreed that after
taking into account the retention sum of RM170,000.00 which would be paid
by the Appellant to the Respondent, the difference of only RM48,815.78 was to
be paid by the Appellant to the Respondent. This sum of RM48,815.78 was paid
to the Respondent through FUSB. With this, the Appellant’s case was that it had
paid the Respondent in full. The learned Sessions Court Judge (“SCJ”) however
allowed the Respondent’s claim and hence the present appeal by the Appellant.
Held, allowing the appeal with costs:
(1) One of the pieces of evidence relied on in support of the Appellant’s claim
that the Respondent had been paid in full was the Final Certificate of
Payment dated 10 May 2012 issued by the architect for the project. Even
the Respondent referred to this Certificate as the Final Certificate showing
the final balance. A final certificate can only be final and comprehensive,
inclusive of all variation and additional works. By this date in 2012,
the works, including the additional works which the Respondent was
claiming for and which was very much in the knowledge of all parties, that
was the Respondent, the Appellant and FUSB as well as the architect, had
already been completed. In this Final Certificate issued to the Respondent,
the sum of RM112,969.64 was confirmed as the net payment due to the
Respondent. That sum was paid by FUSB.
184
(2) In acknowledging acceptance of that payment, the Respondent expressly

agreed that it “will have no further claim for the said project". With this
payment, the Respondent accepted that it had been paid in full and there
was nothing outstanding, including for additional works. This piece of
evidence was not considered by the SCJ.
(3) There was clear evidence of settlement, accord and satisfaction. The
Respondent had accepted the payment as offered by the Appellant, albeit
through FUSB. After it had accepted payment, it then made the present
claim.
(4) Important and material facts and established evidence, especially

contemporaneous documentary evidence emanating from the Respondent
as well, were not addressed by the SCJ rendering the findings of fact
incorrect. Had these pieces of evidence been properly considered and
appreciated by the Court, in all likelihood the SCJ’s decision would have
been entirely different. Although the Court had found that the Respondent
had performed the additional works, the Court had not answered and
not properly answered the follow on issue of whether the Respondent
had been paid in full. The Appellant maintained that the Respondent had
been paid in full and indeed the evidence confirmed that. This was an
appropriate case for appellate intervention.
COMMENTARY 1
by Darshendev Singh
Partner at Lee Hishammuddin Allen & Gledhill
Chairperson, Young Members Group CIArb Malaysia
Introduction
In this case the High Court, in determining whether the Respondent /
Plaintiff had been fully paid for the additional works that it carried out
(“Additional Works”), made the following observations:
(1) Final certificates are usually final and comprehensive on the
value of the works inclusive of all variation and additional works;
(2) Full retention sum is generally not released unless and until all
works have been completed and defects made good;
185
(3) By accepting payment of the net outstanding amount set out in

the final certificate and, in doing so, expressly agreeing that there
will be no further claim, the party would in effect be accepting
that there is no other amount payable to it;
(4) By not contemporaneously challenging a letter of settlement

and accepting payment of the amount offered therein, the party
would in effect be accepting that there has been a settlement on
the terms set out therein.
This was an appeal against part of the decision of the Sessions Court
which allowed the Respondent’s claim of RM171,615.05, being the
balance sum said to be payable for the Additional Works. Focusing only
on a single issue of whether the Respondent (Subcontractor) had been
fully paid by the Appellant (Main Contractor) for the Additional Works,
the High Court allowed the appeal and set aside the decision of the
Sessions Court with costs of RM10,000.00.

The Sessions Court did not properly, or at all, consider the follow on
issue of whether the Respondent had been paid in full which was indeed
confirmed by the following evidence:
(a) Final Certificate

The High Court found that “A final certificate can only be final and
comprehensive, inclusive of all variation and additional works”.
Evidence showed that a final certificate dated 10 May 2012
was issued by the Architect subsequent to the works, including
the Additional Works1, having been completed. Further, the
Respondent referred to this certificate as the final certificate
showing the final balance2. The High Court also found that the
full retention sum is “generally not released unless and until
all works have been completed, and defects made good”. In this
case, there was correspondence prior to the issuance of the final
certificate which showed that the sum of RM170,000.00, being
the second moiety of the retention sum, was being contemplated
to be released.
(b) Express Acknowledgement

In accepting payment of the net outstanding amount of
RM112,969.64 shown in the final certificate, the Respondent
expressly agreed that it “will have no further claim for the
said project”. Accordingly, “With this payment, the Respondent
accepted that it had been paid in full and there was nothing
outstanding, including for additional works”.
186
(c) Implied Acknowledgement

Chronology of events:
(i) On 6 January 2011, a negotiation meeting was held between
the parties and what was generally agreed was captured
in the Appellant’s letter dated 31 January 2011. By letter
dated 16 February 2011, the Respondent disagreed with
the Appellant but was prepared to accept a settlement
sum of RM109,639.20 subject to the same being paid
within 14 days. The sum was not paid but on 12 July 2011
the Appellant wrote to the Respondent on the retention
sum that the Respondent was seeking to recover from the
developer, Faber Union Sdn Bhd (“FUSB”). In the same letter,
the Appellant referred to its letter dated 31 January 2011
where the Respondent is said to have:
“accepted our offer for the amount of RM108,190.29

for additional work… debit notes in total amount to
RM229,347.51 (as against our previously charged
amount of RM295,411.41). Therefore, the balance that
is due to UEMC shall be debited to your retention sum of
RM170,000.00. As such, we shall release RM48,815.78
being payment for the balance of the retention sum and
confirm that the cheque for this sum is ready for collection.
In the interim, we reserve all our rights”.
(ii) There was no immediate reply by the Respondent to this

letter of 12 July 2011 and the Respondent did not dispute
or correct the position therein. Instead, the Respondent
accepted payment3 of RM170,000.00 from FUSB by two
cheques, one of which was the Appellant’s cheque in the
sum of RM48,815.78. The Respondent cashed both the
cheques and thereafter instructed its solicitors to issue
a letter of demand dated 22 July 2011 claiming a sum of
RM108,190.29 to be paid within 14 days, failing which
a total sum of RM171,615.05 would be claimed instead.
By its letter dated 29 July 2011, the Appellant responded

saying that the Respondent had been fully paid and that the
Appellant’s offer of RM108,190.29 had been accepted by
the acceptance of the cheque for RM48,815.28 which had
been cashed. On 1 August 2011, the Respondent’s solicitors
maintained the Respondent’s position but there was no
word from the Respondent on the said settlement; not until
the suit was filed in 2013.
187
The High Court found that “there is clear evidence of settlement, accord
and satisfaction”. It disagreed with the Sessions Court finding that the
negotiation had “never materialized as the time lapsed” and said that
this may be the case for the letter of demand dated 22 July 2011 but “this
letter is of no consequence since the matter had already been resolved
even before this date. If that were not the case or if the Respondent did not
intend the settlement to include the amount that it now claims in Court,
it ought to have responded to the Appellant’s letter of 12.7.2011 which
had referred to an even earlier letter dated 31.1.2011 – see paragraph
23. The Respondent did not. Instead, it accepted the payment as offered
by the Appellant, albeit through FUSB”. “Inasmuch as the Respondent
wanted the Appellant to revert within 14 days failing which the offer to
settle would lapse; similarly the Appellant’s offer of settlement required
a response from the Respondent”4.

If there are works that were carried out but were not properly, or at all,
considered in issuing a final certificate/final account, or the contents
of the final certificate/final account are inaccurate, one should take
all necessary steps to sufficiently challenge the final certificate / final
account within the time stipulated by and pursuant to the relevant
contractual provisions and law. If no time is stipulated, the challenge
should be made within a reasonable time.
Similarly, if one party writes to the other recording matters that were
said to be discussed and/or agreed, the recipient should within a
reasonable time reply rejecting those matters which are inaccurate and
set out its position in relation thereto. Failing which, the recipient may
subsequently find difficulties in challenging the inaccuracies.
Where there is a dispute as to the actual amount payable, one should not
be too hasty in accepting any part payment, especially without sufficient
written disclaimer that the payment is received without prejudice
to the right to recover the balance amount in dispute. This is to avoid
suggestions that by accepting the part payment, any remaining related
debts have been discharged. In any and all event, the party accepting
part payment should never agree that there will be no further claim.
In a situation of a (potential) dispute, it is always advisable to quickly

have a good consultant onboard.
_____________________________________
1. The Additional Works were very much in the knowledge of the Respondent,
Appellant, the developer Faber Union Sdn Bhd (“FUSB”), and the Architect.
188
2. The Respondent suggested that the final certificate did not include the Additional
Works but no evidence was found to have been produced to that effect. Amongst
others, the High Court said “Since the Respondent did ask the architect to value
and certify its works, it remains as works under the contract”.
3. Direct payments from FUSB to the Respondent are not in issue and were in
accordance with the arrangements between the parties at the material time.
4. The Respondent contended that the payment of RM48,815.75 received from

FUSB was related to a suit against FUSB for the release of the retention sum of
RM170,000.00 and had nothing to do with the Respondent’s claim against the
Appellant for the Additional Works. From the judgment, it is not entirely clear:
(a) what was the exact nature and outcome of the matters relating to the suit
against FUSB;
(b) what were the complete contents of the Respondent’s letter dated 16
February 2011and Appellant’s letter dated 12 July 2011.
However, from what could reasonably be deduced from the judgment, it appears
that the Respondent did not contemporaneously dispute or correct the position
contained in the Appellant’s letter of its intention to settle dated 12 July 2011
but, instead, accepted the amount of RM48,815.75 offered therein.
189
COMMENTARY 2
by Sr Amran Mohd Majid
CQS, FRISM
Public Works Department, Malaysia
Introduction
The Appellant (“Contractor”) was appointed by an Employer i.e. Faber
Union Sdn Bhd (“FUSB”) for the construction of 7 block of Condominiums
in Kuala Lumpur. The Respondent (“Subcontractor”) was appointed by
the Contractor to carry out the construction works for certain portion of
the project i.e. tiling and waterproofing works.
The Subcontractor alleged that it had also executed additional works

pertaining to making good defects to works which were carried out
by other Subcontractors which were valued at RM202,117.55. The
Subcontractor further alleged that it had also executed additional
works for the installation of soap and paper holders. In this respect,
the Contractor had already paid RM30,502.50, leaving a sum of
RM171,615.05 outstanding. To fortify its argument, the Subcontractor
alleged that the Architect who was the Superintending Officer (“SO”) for
this project had already approved the said amount. The Subcontractor in
this respect alleged that RM108,190.29 was admitted by the Contractor.
The Contractor denied that the Subcontractor had carried out additional
work. On the contrary, the Contractor alleged that there was a discussion
with the Subcontractor whereby the parties agreed to the following:
(1) The Contractor agreed to reduce the back charges claimed from
RM295,411.41 to RM229,347.51.
(2) The Subcontractor’s claim of RM108,190.29 will be set off from

the Contractor’s claim pertaining to the back charges.
(3) In relation thereto, the difference between the Contractor’s

claim of back charges and the Subcontractor’s claim, a sum
of RM121,184.22, would be paid by the Subcontractor to the
Contractor.
(4) Nevertheless, after taking into account the Retention Sum

of RM170,000.00 which is payable by the Contractor to the
Subcontractor, the Contractor would then pay the difference of
RM48,815.78 to the Subcontractor. In this respect, the Contractor
had already paid RM48,815.78 to the Subcontractor.
190
As such the Contractor’s case was that there was no more outstanding
payment as alleged by the Subcontractor.
After perusing the facts before the court, the High Court ruled that there
were no more outstanding payments due to the Subcontractor. This
was due to the fact that both parties ie Contractor and Subcontractor
referred to the same Final Certificate that was issued by the Architect
for the project showing the final balance. Therefore, the High Court was
of the opinion that both parties accepted and agreed to the veracity of
the Final Certificate.
With regards to the Subcontractor’s allegation that there were additional

Variation Orders (“VOs”) that were carried out by the Subcontractor
but were not included in the Final Certificate, the High Court found
that the Subcontractor failed to prove that the said VOs were not taken
into account. The High Court also found that both the Contractor and
the Employer agreed to the Final Certificate. Hence the computation in
the Final Certificate can safely be relied upon. Further, the High Court
ruled that since the Subcontractor had agreed that there would be no
further claim after the issuance of the Final Certificate, this showed that
the Subcontractor had agreed that all payments had already been made
including all the additional VOs.
With reference to the meeting held between the Contractor and the
Subcontractor on 6 January 2011, the Contractor had sent a letter
dated 12 July 2011 to the Subcontractor confirming the final settlement
amount for the subcontract would be RM48,815.78. The Subcontractor
did not dispute the content of the said letter but instead accepted a
payment cheque from the Contractor for the amount of RM48,815.78.
Therefore, the High Court ruled that there was indeed already a final
settlement pertaining to the state of affairs since there was accord and
satisfaction between both parties pertaining to the settlement of final
account.
It was only two years later that the Subcontractor commenced legal
action against the Contractor.

The Subcontractor must prove there were SO’s instructions, related
drawings, quantities of work involved as well as the related rates for the
VOs in order for the Subcontractor to prove its claim. If the Subcontractor
fails to do this, its related claim would therefore most probably fail.
191
Another aspect that must be considered is that in the event that the
Subcontractor had agreed to the Final Certificate issued by the SO
and agreed that it would not be making any further claim in relation
to the project, the Subcontractor could not thereafter renege from its
agreement given the fact that it had waived its right to make any further
claim thereafter. It can be argued that there was accord and satisfaction
on the Subcontractor’s part to the said Final Certificate pertaining to the
Final Account of the project.
The payment for the retention sum, when it was due to be paid to the
Contractor could be set off from any valid claim by the Employer against
the Contractor.

Based on the principles adumbrated from the case above, it’s best for
any party to the construction contract to keep records pertaining to
their claims. In this respect if there are claims pertaining to VOs, both
Contractors and the Employer must have records to prove the VOs were
actually done and the basis of the valuation of the said VOs must also
be supported. Therefore, in a nutshell, all discussions and negotiations
between parties should be properly recorded so that they may serve
as true records of any agreement or disagreement and also avoid any
potential dispute.
192
Usahasama SPNB-LTAT Sdn Bhd v ABI Construction Sdn Bhd
Usahasama SPNB-LTAT Sdn Bhd v

ABI Construction Sdn Bhd
ORIGINATING SUMMONS NO: WA–24C(ARB)–1–01/2016
LEE SWEE SENG J
29 APRIL 2016
_________________________
[2017] 1 CIDB-CLR 193
The Plaintiff, as employer, entered into a PWD 203 contract (“the contract”)
with the Defendant, as contractor whereby the Defendant agreed to perform
certain construction works (“the works”) for the Plaintiff. A dispute arose
between the parties. The Plaintiff terminated the contract by its letter dated 19
February 2008. The Defendant as claimant proceeded to arbitration by issuing
a notice of arbitration dated 12 February 2014 to the Plaintiff. The Arbitrator
then fixed a date for the preliminary meeting. Before the preliminary meeting,
the Plaintiff raised an objection that in accordance with cl 54 of the contract,
the Defendant would first have to refer the dispute to the Managing Director
of the Plaintiff as the Superintending Officer (“SO”) for a decision before the
dispute was referred to arbitration. As such, it was contended that the notice of
arbitration was premature and accordingly the Arbitrator had no jurisdiction
to decide the dispute. The solicitors for the Plaintiff made an application under
s 18 of the Arbitration Act 2005 (“the Act”). The Arbitrator held that he did
have the jurisdiction to decide the dispute between the parties and dismissed
the Plaintiff’s application. The Plaintiff being dissatisfied with the decision of
the Arbitrator, appealed to the Court under s 18(8) of the Act. The Plaintiff
contended that the condition found in clause 54(a) and (b) were mandatory,
in the form of a precondition or a condition precedent, which must be fulfilled
before the Arbitrator had jurisdiction to hear the dispute. The Defendant, on the
other hand, contended that the various letters between the parties, both before
and after the notice of arbitration, were sufficient compliance in substance,
directly or indirectly, with the requirement of clause 54 of the contract. It was
further argued that in any event the Plaintiff had waived the requirement and
was estopped from objecting on that ground, as it had not raised it at the earliest
opportunity when it received the notice of arbitration on 13 February 2014 and
had a few rounds of without prejudice negotiations with the Defendant even
after the preliminary meeting before an earlier Arbitrator. The issues arising
for decision were as follows: (i) whether an appeal under s 18(8) of the Act
was by way of a rehearing rather than a review of the Arbitrator’s decision on
jurisdiction; (ii) whether a reference to the SO under clause 54(a) and (b) of
the contract was a precondition or a condition precedent to arbitration under
clause 54(c) of the contract; (iii) whether the various correspondences between
the parties and in particular the letter from the Defendant to the Plaintiff
dated 3 September 2010 was sufficient substantial fulfillment of the condition
193
precedent before reference to arbitration as required under clause 54(a) and

(b) of the contract; and (iv) whether Plaintiff had waived the precondition of a
reference of the dispute to the SO before the Defendant proceeded to arbitration.
(1) The Court followed the approach as if hearing the issue afresh and
uninfluenced by the prior decision of the Arbitrator either way, respecting
always the cogency of reasons given by the Arbitrator but unrestrained by
what had undergirded his decision.
(2) A precondition or a condition precedent is a condition that has to be

fulfilled before a right accrues. Once it is contractually agreed upon,
the parties should be held to the bargain unless such an agreement is
prohibited by law or that it is too vague for enforcement. Here it was not
suggested that there was a statutory prohibition against it. Both parties
had agreed contractually to a precondition to be fulfilled before there
could be a valid reference to arbitration.
(3) An Arbitrator’s jurisdiction is contractually agreed by both parties

to an arbitration agreement. In a very real sense, until and unless
the contractually agreed conditions are fulfilled for the reference to
arbitration, the Arbitrator concerned cannot assume jurisdiction.
(4) The requirement that the contractor must first refer the dispute or
difference to the SO for a decision before the dispute was referred to
arbitration in accordance with clause 54(a) and (b) of the contract was
clearly in the form of a condition precedent to clause 54(c).
(5) Where commercial parties have agreed a dispute resolution clause which
purports to prevent them from launching into an expensive arbitration
without first seeking to resolve their dispute by friendly discussions, the
courts should seek to give effect to the parties’ bargain. Moreover, there is a
public interest in giving effect to dispute resolution clauses which require
the parties to seek to resolve disputes before engaging in arbitration or
litigation.
(6) The reference by the contractor to the SO for a decision of the differences
or disputes must be a reference of sufficient particularities addressed
to the SO such that anyone reading the said reference in writing would
know clearly that it is a reference under clause 54(a) of the contract,
calling for a decision in writing within 45 days of the reference. Without
knowing which letter was a reference under clause 54(a), there would
be the corresponding difficulty as to when reference to arbitration ought
to be made. Whilst appreciating that substance must prevail over form,
one must ask whether there is a semblance of sufficient compliance with
substance in all the circumstances of the case in the correspondence
referred to by the contractor.
194
(7) In determining whether the referrals by way of letters written to try to

resolve the dispute or difference were sufficient compliance with clause
54(a) and (b), the Court had to be confined to the letters written before
the reference to arbitration via the notice to arbitrate. Letters after the
said notice to arbitrate and meetings held pursuant to such letters would
not be relevant.
(8) The thrust of the Defendant’s letter was not for a decision of the SO but
an expression of its dissatisfaction over the final accounts as derived
and determined by the SO. It was an appeal to the SO to revisit such a
determination by taking into consideration the various factors raised by
the Defendant. Such a letter fell short of a reference under clause 54(a)
of the contract. There must be sufficient specificity with reference to the
disputes or differences and an invocation of the said clause calling for
nothing short of a decision.
(9) A plea that the arbitral tribunal had exceeded the scope of its authority has
to be raised as soon as the matter which is alleged to exceed this authority
is dealt with in the arbitral proceedings. The applicant party must include
in its application all of the grounds of jurisdictional challenge known to it.
The failure to raise a plea as to the arbitral tribunal exceeding the scope of
its mandate would not necessarily preclude raising such a plea in setting
aside or in recognition and enforcement proceedings as s 37(1)(a)(iv)
and (v) of the Act permits the setting aside of the award on these grounds.
195
COMMENTARY 1
by Janice Tay
Partner at Skrine
Introduction
In this case, disputes arose on the construction of clause 54 of the
contract. The Plaintiff took the position that the notice of arbitration
issued by the Defendant was premature as clause 54 had not been
complied with whereas Abi’s position was that clause 54 had been
sufficiently complied with and the Plaintiff was estopped from objecting
as it had not raised this issue when it first received the notice of
arbitration. The High Court decided, inter alia, that clause 54 contained
preconditions to arbitration and that the Defendant had not sufficiently
complied with clause 54.

The following guidelines and lessons may be gleaned from the case of
Usahasama:
(1) The High Court’s decision in this case was helpful as it provided
guidance on the approach adopted by the Malaysian Courts in
construing multi-tiered dispute resolution clauses in Malaysia,
also known as escalation clauses. It would appear that the
Malaysian courts would respect the parties’ choice of multi-
tiered dispute resolution clauses, where sufficiently clear and
allowed by law, as preconditions to be complied with before the
commencement of any legal proceedings. The intention of the
parties as well as public interest would operate to constrain the
Courts to enforce such a clause.
(2) In determining whether the precondition has been complied

with, one must ask whether there has been “sufficient compliance”
in all the circumstances of the case whilst appreciating that
substance must prevail over form.
(3) The failure to comply with such clauses may result in a challenge
to the arbitral tribunal’s jurisdiction. In the worst case scenario,
one might even be faced with a successful arbitral award later
being challenged for lack of jurisdiction in a setting aside
application or an opposition to enforcement.
196

It is crucial to draft multi-tiered dispute resolution clauses with clarity
and sufficient detail as ambiguity can result in delay, additional costs
and perhaps even bar a claim where a limitation period is set to expire
before the contractually mandated negotiation period.
The following practices are suggested in the event one is minded to

incorporate a multi-tiered dispute resolution mechanism in a contract
and where one is faced with such a clause.
(a) Consider whether a multi-tiered dispute resolution clause is

appropriate for your contract. Factors include the following:
(i) Do parties have a good commercial relationship which they
wish to preserve and therefore would like an opportunity
to resolve disagreements amicably?
(ii) Would this be an opportunity to resolve disagreements
relatively inexpensively or would these lead to an
unnecessary waste of time and expense?
(iii) Would this bar a party’s ability to secure interim measures in
a time-sensitive dispute by postponing the commencement
of the arbitration or litigation?
(b) In the event a multi-tiered dispute resolution clause is

appropriate for the contract, have the following in mind:
(i) Is this process mandatory or directory? For example the
usage of the word “shall” would indicate that such matters
be a condition precedent to the right to refer a claim to
arbitration or litigation whereas the word “may” indicate
that such matters are merely optional.
(ii) Identify the form the process is to take (i.e. the aim of the
process):
(a) Would parties wish this process to be confidential
for purposes of facilitating settlement or would it be
used towards facilitating the eventual litigation where
parties are required to narrow down issues?
(b) Would parties prefer a simple form where the multi-
tier clause will require parties to engage in a single step
prior to commencing arbitration, such as negotiations
among party representatives for a defined period?
(c) Would parties prefer a more complex form where the
multi-tier clause may require parties to undertake
multiple steps prior to commencing arbitration, such
as negotiations among lower-level representatives,
followed by negotiations by higher-level representatives,
followed by mediation or conciliation proceedings, all
with defined periods?
197
(d) What is the final outcome or forum? If parties wish

to agree to resolve their disputes only by way of
arbitration proceedings, their arbitration clause
should clearly say so by using the word “shall” instead
of “may”.
(iii) How would each option may be exercised? (e.g. by notice in
writing?, service on a particular address and by a particular
method?)
(iv) Who are the representatives involved in this process?
(v) What are the minimum obligations in terms of participation?
(vi) What are the timelines and when or how each process
would be exhausted?
(vii) Who bears the costs of the process?
(c) Once the multi-tiered dispute resolution clause is incorporated

and in the event one is eventually faced with possible litigation:
(i) ensure compliance with the process agreed to by parties;
(ii) record in writing the steps carried out in compliance with
the process to prevent any objections from being raised
later on;
(iii) in recording such steps, refer to the specific multi-tiered
dispute resolution clause with sufficient specificity;
(iv) be careful of the limitation period.
198
COMMENTARY 2
by Garth Rodney McComb
MRICS, ACIArb, MSA
General Manager, Driver Trett, Malaysia
Introduction
This case revolved around the need to follow the various steps in a multi-
tiered dispute resolution clause and whether or not correspondences
and other communications between parties could be deemed to
have satisfied the requirements of the clause or whether the Plaintiff
(Employer) had waived the requirements.

The first and possibly most important part of the decision to note is
that the High Court of Malaysia has agreed with Courts in most other
common law jurisdictions in holding that the various tiers of a multi-
tiered dispute resolution clause must be followed in sequence prior to a
reference of the dispute to Arbitration.
Reference of claims to the Contract Administrator (“CA”) (in this case

it was the Superintending Officer (“SO”)) for a decision is often the
first step in a multi-tiered dispute resolution clause, yet on numerous
occasions there have been Contractors who felt there was no point
referring a claim to the Contract Administrator under the dispute
resolution clause as the CA had already rejected the claim under the
contractual claim/payment mechanisms.
This case confirms however that once parties have agreed to a series
of steps to be followed before they can refer a matter to arbitration,
they will be required to follow those steps no matter how pointless or
unnecessary they may seem to have become by the time the Claimant
resorts to the dispute resolution clause.
It has generally been the case that what appeared to the Contractor as
being a pointless process that he was required to comply with prior to
Arbitration has often led to positive results and has nearly always, at the
very least, reduced the number of issues that were eventually referred
to arbitration.
Often an Employer’s Representative or SO will take a very different

stance once a claim has been referred to him under a dispute resolution
clause than he took when it was simply submitted under the contractual
claim mechanism. Presumably this is because there is more pressure on
199
him to get the answer right when he knows that arbitration may be the
next step if he doesn’t. In this case the SO’s decision was to be binding
on the parties at least until the completion of the works and so the SO
needed to be very careful to get the decision right.
It is also worth remembering that the timing of the reference to the SO

for a decision needs to be considered carefully particularly when the
SO’s decision is binding until completion of the works. In this case,
reference to arbitration was to be done within 45 days of the decision
(if a decision was given) or within 45 days after the expiry of 45 days
from the request for decision (where no decision was given).
However, arbitration could not be commenced until after completion

of the works. Thus a claiming party should be certain that he has given
the CA all the necessary information for him to make a fair assessment
of the claim prior to asking for a decision which (in this case at least)
would be binding until completion of the works.
If the basis and/or substance of the claim are/is different once

arbitration commences, the claimant would likely lose its rights to
interest and other costs incurred between the time of the request for
a decision and the commencement of arbitration. If the basis and/or
substance of the claim at arbitration is significantly different from the
original claim referred to the SO there could be an argument that the
claim referred to arbitration had not been through the contractually
mandated process and the Contractor would have to start again with a
fresh referral to the SO.
The need to remain patient is the key advice that may be given to
someone contemplating arbitration. Arbitration can be a costly and
time consuming process and should not be taken lightly. A notice of
arbitration often signals the end of settlement discussions at least until
parties realise just how costly and time consuming it can become. Any
potential for resolving disputes by alternative (cheaper and quicker)
means should be fully explored prior to a reference to arbitration.

Contractors (and Employers for that matter) should know, understand
and follow the terms of their contract no matter how pointless or
unnecessary they may seem to have become.
Contractors (and Employers) should be specific when seeking to comply

with the terms of a contract, i.e. when a letter is intended as a reference/
notice pursuant to a particular clause, the clause should be quoted in
bold in the letter heading.
200
Claimants should be certain that they have submitted sufficient and

comprehensible details of their claim to allow for a fair assessment prior
to initiating a multi-tiered dispute resolution clause (this is particularly
important where any of the preliminary tiers result in a decision that is
binding, even if only temporarily so).
Contractors should also not fear or hesitate to quote or refer to

contractual clauses and give notices required under a contract. In most
cases the contract will have been chosen by the Employer and should,
at least, be designed to protect both parties. Employing it should not be
seen as a bad thing.
Finally, it should be remembered that the claimant may find relief for
claims aside from that found in the contractual mechanisms. CIPAA for
example gives a statutory right to seek payment for work done under
a Construction Contract and is not in any way restricted or limited by
contractual agreements.
201
ACFM Engineering & Construction Sdn Bhd v
ACFMEsstar
Engineering & Construction
Vision Sdn SdnAppeal
Bhd & Another Bhd v
ACFM Engineering & Construction Sdn Bhd v

Esstar Vision Sdn Bhd & Another Appeal*
CIVIL APPEAL NOs: W–02(C)(A)–1165–07/2015 &
W–02(C)(A) –1166–07/2015
19 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 205
The Appellant had appointed the Respondent as a subcontractor in a project

for the sum of RM843, 442. The subcontract was subsequently terminated
on conflicting grounds. The Appellant alleged that the Respondent’s works
were not satisfactory and the Respondent alleged that it was not paid. The
Respondent served an adjudication claim under the Construction Industry
Payment and Adjudication Act 2012 ("CIPAA") on the Appellant for outstanding
sums amounting to RM770,791.96. The Respondent served an adjudication
notice dated 15 August 2014 on the Appellant on 17 August 2014. The
contents of the adjudication notice were simply the outstanding progress
claims for works done in the sum of RM770,791.96 out of which the sum
of RM575,256.22 was alleged to have been admitted by the Appellant. In
response, the Appellant contended that: (i) there were no terms of payment in
the letter of award; (ii) the Respondent was only entitled to works done which
amounted to RM371,858.32; (iii) the work of the Respondent was "shoddy and
unprofessional"; and (iv) the Appellant had purchased materials and delivered
the same to the Respondent. The adjudicator found in favour of the Respondent
and awarded a sum of RM463,387.20. The Respondent then proceeded to
demand from the Appellant for payment of the adjudged sum pursuant to s 30
of CIPAA 2012. The Respondent filed an application at the High Court to enforce
payment of the aforesaid sum. In response, the Appellant filed an application to
set aside the decision of the adjudicator. The High Court heard both the above
applications and decided to dismiss the application of the Appellant to set aside
the adjudicator’s decision and to allow the application of the Respondent to
enforce the award. The Appellant appealed against both decisions to the Court
of Appeal.
Held, dismissing the appeals with costs:
(1) The crux or foundation of the Appellant’s application was simply that
the adjudicator had breached the principle of "natural justice" when
conducting the adjudication hearing. In substance, the complaint of the
Appellant related to the manner in which the arbitrator arrived at his
decision. The Appellant was simply saying that the arbitrator had made
205
wrong findings of fact and as such the High Court should have set aside
the adjudicator’s decision.
(2) The philosophy behind the adjudication regime in the construction

industry may be said to be encapsulated in s 12 of the CIPAA 2012. The
philosophy is to introduce an adjudication regime in which interim claims
made by subcontractors can be dealt with by appointed adjudicators in a
speedy and economical manner. The benefit of such regime is plain and
obvious in that the claims of subcontractors — being the lifeline of their
survival — must not be delayed without valid reasons by the contractors.
The unnecessary stoppage of the flow of money would be avoided.
(3) In the instant case, the complaint of the Appellant related to questioning
the findings of facts made by the adjudicator. There was also no evidence
that the Appellant was prevented from tendering evidence or making
submissions on issues raised in the adjudication. There was also no
complaint that the adjudicator had got the disputes on a completely wrong
footing. If the Court were to consider the complaints of the Appellant, it
would tantamount to the Court looking into the merits of the adjudicator’s
decision. Pursuant to s 15 of CIPAA, it could not be the function of the
Court to look into or review the merits of the case or to decide the facts
of the case. The Court’s function is simply to look at the manner in which
the adjudicator conducted the hearing and whether he had committed
an error of law during that process. Such error of law relates to whether
he had accorded procedural fairness to the Appellant. In the instant case,
the complaints of the Appellant were nothing but complaints of factual
findings of the adjudicator which the Court could not entertain.
(4) This was simply a case where the losing party was not happy that it had
obtained an unfavourable decision and tried its chance in the judicial
system. The law currently limits the Court’s functions and prevents it
from reviewing the correctness of the adjudicator’s decision, save for very
exceptional circumstances. The prima facie view of the Court must be to
affirm the adjudicator’s decision unless the losing party can show that it
had complied with the thresholds listed in s 15 of the CIPAA.
_____________________________________
* For the case summary on the High Court decision, see ACFM Engineering & Construction Sdn
Bhd v Esstar Vision Sdn Bhd [2016] 1 CIDB-CLR 169 (published in CIDB Construction Law
Report 2015).
206
Bauer
Bauer(M)
(M)Sdn
SdnBhd
BhdvvKukdong
KukdongEngineering
Engineering&&Construction
ConstructionCo
CoLtd*
Ltd
Bauer (M) Sdn Bhd v Kukdong Engineering &

Construction Co Ltd*
HARMINDAR SINGH DHALIWAL JCA
8 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 207
The Respondent — a Korean company — appointed the Appellant as

subcontractor in respect of certain piling works. Disputes arose between the
parties resulting in a suit commenced by the Respondent in the High Court.
The suit was stayed pending reference to arbitration. In the arbitration, the
Appellant claimed for the sum approximating RM7.5m. During the arbitration
proceedings, the Respondent filed a petition for a rehabilitation order in the
South Korean Court, which on 11 October 2012 issued a commencement order
for a rehabilitation exercise. The effect of such exercise was that the CEO of
the Respondent became trustee to oversee the rehabilitation exercise and
became empowered to accept or reject claims from the Respondent’s creditors.
The Appellant lodged its claim approximating RM7.5m with the Respondent’s
trustee but on 18 March 2013, the trustee reduced the same to a sum
approximating RM6.6m only. The Appellant as a recognized creditor appealed
to the South Korean Court but in the Malaysian arbitration proceedings sought
an interim award approximating RM6.6m from the Arbitrator based on the
Respondent’s admission of the said sum. The Respondent, upon seeing the
Appellant’s application for the interim award, invoked s 41 of the Arbitration
Act 2005 and referred two (2) questions of law to the High Court. The questions
were: (i) given the status of the rehabilitation proceedings in South Korea, was
the Appellant entitled to apply for an award in the arbitration for the same
debt; (ii) did the arbitrator have jurisdiction or the mandate to grant an award
over a debt admitted and made subject to a rehabilitation scheme in a foreign
jurisdiction by consent of both parties? The High Court Judge answered both the
questions of law in the negative, which essentially produced a result prejudicial
to the Appellant’s claim against the Respondent in the arbitration proceedings.
The Appellant thus appealed to the Court of Appeal.
Held, allowing the appeal:
(1) Section 41 of the Arbitration Act 2005 can only be resorted to when the
questions to be referred to the High Court are questions of law arising "in
the course of the proceedings". The High Court’s jurisdiction to hear such
application is premised only on the existence of a question of law which
formed the subject matter of the application itself. As it is a jurisdiction
207
issue, the High Court must be satisfied that there are questions of law
involved even though the application is made with the consent of the
arbitrator. The High Court is fully entitled to strike out the application if
the same does not contain questions of law.
(2) The first task of the Judge is to identify the precise questions of law.
The task of determining what is a question of law and question of fact is
sometimes not an easy task. In the instant case, the Judge had omitted the
preliminary task of determining whether the questions referred were in
fact questions of law. From the conflicting contentions of the Appellant
and Respondent, both the Arbitrator and the Judge failed to observe that
the questions posed to the Court were in fact on the assumption that the
Appellant had agreed to forfeit its rights in the arbitration proceeding
in exchange for its participation in the South Korean Court proceedings.
The Appellant had strongly contended that its participation in the South
Korean Court proceedings could not be equated to a forfeiture of its
rights in the arbitration proceeding and the Respondent had also strongly
contended otherwise. These divergent views plainly gave rise to a serious
dispute of fact which was within the jurisdiction of the arbitrator to
determine. Such determination could only be adjudicated by way of oral
evidence from witnesses of both the Appellant and Respondent.
(3) The High Court Judge derived jurisdiction only when the very subject
matter of the application related to a pure question of law and when
it is not, then there is a complete lack of jurisdiction. The High Court’s
jurisdiction under s 41 of the Arbitration Act 2005 is derived only when
the question framed related to a pure question of law. In the instant case, a
dispute of fact as to whether there was a waiver of rights in the arbitration
proceeding by the Appellant had to be resolved first by the arbitrator who
was the trier of facts before the questions framed could be asked and
answered.
_____________________________________
* For the case summary on the High Court decision, see Kukdong Engineering & Construction
Co Ltd v Bauer (M) Sdn Bhd [2016] 1 CIDB-CLR 235 (published in CIDB Construction Law
Report 2015).
208
Benalec Marine Sdn Bhd v Liziz Standaco Sdn Bhd
Benalec Marine Sdn Bhd v Liziz Standaco Sdn Bhd

CIVIL APPEAL NO: D–02–1437–06/2013
MOHD ZAWAWI SALLEH JCA, BADARIAH SAHAMID JCA,
MARY LIM THIAM SUAN JCA
13 MAY 2016
_________________________
[2017] 1 CIDB-CLR 209
The Appellant was appointed under a letter of award (“the contract”) as

contractor by the Respondent in respect of river sand dredging works (“the
Project”). The parties agreed under the contract inter alia, that the Respondent
would pay for the cost of monthly diesel fuel consumed during the course of
the works as well as the monthly wages of the Appellant’s personnel and crew.
The Appellant never completed the works. Instead, the Appellant notified the
Respondent by letter that it was terminating the contract by reason of the
Respondent’s repudiatory breach of contract which entitled the Appellant
to terminate the contract. The Appellant contended that the Respondent’s
refusal to pay the monthly progress claims and the monthly wages of the staff,
personnel and crew constituted some instances of repudiatory breach. The
Respondent sued the Appellant, claiming that the Appellant was in breach of
contract when it did not complete the contract works. The Appellant denied
that it was in breach, claiming that it was actually the Respondent who had
committed various repudiatory breaches which entitled the Appellant to accept
the repudiation and terminate the contract. The Appellant counterclaimed for its
loss and damage. The trial court found that the Respondent had not committed
any breach of contract including any repudiatory breach which entitled the
Appellant to a termination of the contract. Instead, the trial judge found the
Respondent's claim proved on a balance of probabilities and proceeded to allow
the claim with damages to be assessed while the Appellant’s counterclaim was
dismissed. The Appellant appealed to the Court of Appeal. The Appellant’s case
was that it stopped work because it was not paid. Not only was the Appellant not
paid, its subcontractor who was supposed to be paid directly by the Respondent
was also not paid. At the same time, the Respondent was said to have not paid
for the diesel fuel costs or supplied the diesel fuel. When this happened, work
stopped and idling costs were incurred. The counterclaim was for the progress
claims and for idling costs.
(1) The Respondent was only entitled to deduct payments for the diesel
fuel, workers’ wages, and two instalment payments. The Appellant’s
calculations were borne out and confirmed by the testimony of the
Respondent’s own witness, SP2, that on the matter of the repayments for
209
the advance, the repayments were to be recouped periodically over the

duration of the contract and not in one single repayment, as was done by
the Respondent.
(2) Apart from the monthly progress claims, the Respondent was obliged
to make "third party payments", that is, pay for the diesel fuel, pay for
the wages of the personnel and crews, and pay the sand discharging
subcontractors for their work. Where the Respondent had made those
payments, it was entitled to deduct such payments from the Appellant’s
monthly progress claims. The obligation to pay monthly progress claims
and such other payments as agreed was an important and significant
term of the contract. It was a fundamental term of the contract where the
Appellant was entitled to treat itself as discharged from its obligations
under the contract.
(3) With regard to the counterclaim, the Respondent’s defence was essentially
one of denial. The Appellant had led sufficient evidence to prove that the
Appellant was first and foremost entitled to its claims for progress claims
for work done to date. However, there had to be be deductions for the
full advance, diesel fuel and for back charges. The Appellant had adduced
sufficient evidence to prove on a balance of probabilities that as a result
of the Respondent’s non-payment of the Appellant’s progress claims and
those other payments as identified, the Respondent was liable for idling
costs up to the date of termination. However, a distinction ought to be
made on such costs.
210
CB Land Sdn Bhd v Perunding Hashim & Neh Sdn Bhd
CB Land Sdn Bhd v

Perunding Hashim & Neh Sdn Bhd
CIVIL APPEAL NO: B–02 (IM)–1571–09/2015
1 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 211
The Appellant was appointed by the Employer to construct apartments (“the

Project”). The Respondent — an Engineering Consultant — was appointed
to inter alia, provide supervision and structural engineering services for the
Project. The Respondent informed relevant parties that there were structural
defects in an apartment block in the Project. The Appellant claimed that the
structural defects were as a result of the Respondent’s negligence or failure
to discharge its contractual duty as the civil and structural engineer for the
Project. The Appellant claimed against the Respondent for collateral works due
to the structural defects. In the High Court, the Respondent filed an application
under O 18 r 19 of the Rules of Court 2012 to strike out the Appellant’s writ of
summons and statement of claim on the grounds of limitation under contract
and tort. The High Court allowed the application and the Appellant appealed to
the Court of Appeal.
(1) An application pursuant to O 18 r 19 of the Rules of Court 2012 is a

summary power to be exercised sparingly and only in cases where it is
conspicuously clear that the claim on its face is obviously unsustainable.
If the pleadings disclosed some cause of action or raised some question fit
to be decided, however slight the chances of succeeding, the case should
not be summarily struck out.
(2) On the facts and the law in the instant case, there were triable issues of
fact raised which could only be resolved by viva voce evidence at the trial
and not merely by affidavit. The date of accrual of a cause of action was
crucial to determine whether the action was time-barred as time ran from
the date the cause of action arose. In actions for breach of contract, the
cause of action arises at the date of the breach of the contract. However, in
tort actions, the cause of action arises when the claimant suffers damage.
(3) In the instant appeal, there was a dispute as to the factual matrix of the case
in particular with respect to the existence and discovery of the structural
defects. Amongst the issues the trial court would need to determine, were
211
whether there were any breaches or negligence in the design as alleged,

and whether that even at the design stage it was foreseeable that it would
cause the structural defects.
(4) In the instant appeal, there was an appealable error that had been shown
by the Appellant, which justified appellate intervention. The decision of
the High Court ought to be set aside and the case remitted to the High
Court for full trial.
212
Cheah Swee Huat & Anor (respectively sued as Chairman and Secretary to Seh Tek Tong,
CheahSweeHuat&Anor(respectivelysuedasChairmanandSecretary
Cheah to SehTekTong,
Kongsi, CheahKongsi,
a registered aregistered
society) society)
v Hun vHunMeng
Meng Development
Development SdnBhd
Sdn Bhd
Cheah Swee Huat & Anor (respectively sued

as Chairman and Secretary to Seh Tek Tong,
Cheah Kongsi, a registered society) v Hun Meng
Development Sdn Bhd
CIVIL APPEAL NO P–02–1917–11/2014
MOHD ZAWAWI SALLEH JCA, VARGHESE GEORGE JCA AND
BADARIAH SAHAMID JCA
26 AUGUST 2016
_________________________
[2017] 1 CIDB-CLR 213
A registered society (“Cheah Kongsi”), of which the Appellants / Defendants

were the trustees and principal office bearers, entered into an agreement
(“the agreement”) with the Respondent (“the Plaintiff”), which was a property
developer company. The agreement was to develop two lots of land belonging to
Cheah Kongsi (i.e. Lots 429 and 430) together with five adjoining pieces of land
belonging to other parties (“the development project”). Upon Cheah Kongsi’s
application (based on an EGM resolution of 14 August 1996 authorizing and
approving the entry into the agreement by Cheah Kongsi), the High Court on 31
October 2005 approved and sanctioned the agreement that had been entered
into by Cheah Kongsi with the Plaintiff. The proposed development on lands
owned by Cheah Kongsi and the other parties were planned to be undertaken
in two phases. Phase 1 involved Lot 429 and two lots owned by the other
parties and the Phase 2 involved Lot 430 and three lots of the other parties.
An application for subdivision of the lots of land in Phase 1 was also approved
by the land authority. Subsequently, Cheah Kongsi was requested to surrender
the title document to Lot 429 to the Plaintiff or to the land authorities for
excising the widened road reserve for the back lane, before construction works
could commence. Cheah Kongsi however refused to so surrender. The Plaintiff
consequently brought an action alleging breach of contract and claimed for
damages to be paid by Cheah Kongsi. The High Court allowed the Plaintiff’s
action, but only partially granted the claim for damages, holding that the
Plaintiff had an obligation to mitigate their losses, which they had failed to
do. Cheah Kongsi appealed the decision whereas the Plaintiff cross-appealed
as regard the damage awarded. The three broad areas of controversy for the
Court of Appeal’s deliberation were: (i) the findings of the High Court as to the
validity and enforceability of the agreement; (ii) the findings of the High Court
that there had been a breach of contract committed by the Appellant’s failure to
hand over the title deed to Lot 429 when required; and (iii) the assessment and
award of damages made by the High Court. There were two main issues that
arose for consideration from the award of damages made by the High Court.
Firstly, there was the question whether the High Court was entitled to consider
213
and include the losses that allegedly would follow from an abandonment
of Phase 2 development as a composite part of the damages awarded to the
Plaintiff. Secondly, whether in respect of Phase 1 itself, whether the High Court
was correct to award “loss of profit” for Phase 1 relying on the calculations and
projections presented without further proof and assessment, especially when
the High Court on its own initiative had factored in a deduction for "mitigation"
as the Court did here.
Held, allowing in part the Appellant’s appeal and dismissing the Respondent’s
cross-appeal
(1) There existed sufficient evidence of related discussion and due approval
by the members of Cheah Kongsi to enter into the contract with the
Plaintiff, as recorded in the minutes of the EGM and GM held prior to the
execution of the agreement. With Cheah Kongsi’s EGM resolutions already
in place and, in any event, with the obtaining of the subsequent court
order of 31 October 2005, which endorsed the entry into the agreement
itself (obtained at the instance of Cheah Kongsi themselves), it was not
open for Cheah Kongsi to now state that the sanction-condition for the
performance of the contract, had not been duly satisfied.
(2) The misdescription of the ownership of the other lands involved in the
development project (as belonging to the Plaintiff rather than to owners
of the other lots) in the preamble to the agreement was purely a mistake
and not of any consequence to the effectiveness or enforceability of the
agreement.
(3) The conclusion of the High Court that there had been a breach of contract
committed by Cheah Kongsi when they refused to hand over the title
deed to Lot 429 was a finding of fact supported by the evidence placed
before the Court. The obligations contractually incumbent upon Cheah
Kongsi had to be considered particularly in the context of clause 12.05
of the agreement. Cheah Kongsi could not avoid their obligation to hand
over the title deed to Lot 429 when requested for by the Plaintiff and/or
directed by the land authorities.
(4) Cheah Kongsi had acquiesced and allowed the Plaintiff to proceed with
the various steps required to carry out the development agreed to by
Cheah Kongsi pursuant to the terms of the agreement. The Plaintiff had
submitted and subsequently obtained planning approval (subject to
conditions), proceeded to even clear the squatters and ground tenants on
the land in question, and further had responsibility for and paid all quit
rents and assessment during the period due on Cheah Kongsi’s land.
(5) The High Court’s observation as to Cheah Kongsi’s underlying motives

for refusing to surrender the title document was backed by what was
contained in the minutes of the trustees meeting. It was not misplaced
214
Cheah Swee Huat & Anor (respectively sued as Chairman and Secretary to Seh Tek Tong,
CheahSweeHuat&Anor(respectivelysuedasChairmanandSecretary
Cheah to SehTekTong,
Kongsi, CheahKongsi,
a registered aregistered
society) society)
v Hun vHunMeng
Meng Development
Development SdnBhd
Sdn Bhd
nor was it a misdirection which warranted reversal of the decision that

there was firstly, an enforceable contract in existence with Cheah Kongsi,
and secondly that this contract had been breached by Cheah Kongsi.
(6) There had been a breach of contract committed by Cheah Kongsi when
they chose not to hand over the document of title to Lot 429 for the
attention of the land authorities. Their refusal was unjustified especially
since there was an undertaking that the to be issued title in continuation
would still bear Cheah Kongsi’s name as the owner of the land. There was
no transfer entailed here which could have been construed to be adverse
to the Cheah Kongsi’s continued registered interest in Lot 429.
(7) The Phase 2 development had not reached anywhere near the stage
that Phase 1 development had progressed to. Realisation towards what
was envisaged as Phase 2 development was definitely a long way off.
Therefore, the Plaintiff's claim framed as "loss of forseeable loss of profit
from development opportunity of Phase 2" was therefore too remote and
did not arise directly from the breach of contract (the non-surrendering
of the title deed to Lot 429) by Cheah Kongsi.
(8) It was not wholly accurate to describe the overall development project as
"composite" or "an integrated one". Clearly the evidence showed that there
were two stages in the envisaged development of the lands belonging to
Cheah Kongsi and the other owners. The Phase 2 stage of development
involving Lot 430 and the other lots was not at all contiguous to the lands
involved in the Phase 1 development.
(9) With respect to Phase 1, the expenses already incurred by the Plaintiff
and also anticipated gain from that part of the development project, fell
within losses reasonably contemplated under the breached agreement;
they were not remote or indirect and therefore was recoverable subject
to proper and sufficient proof of such loss or expenses. Only proof of the
sum of RM842,352 incurred or spent by the Plaintiff towards progressing
the Phase 1 development was properly adduced before the Court by the
Plaintiff. This amount had to be therefore allowed.
(10) The Plaintiff no doubt had an obligation to mitigate their losses or by

evidence demonstrate that Phase 1 development could not be saved or
modified without involving Lot 429 belonging to Cheah Kongsi. No such
evidence was forthcoming either from the Plaintiff or Cheah Kongsi. The
very premise upon which the learned trial judge on his own imposed
a "formula" to represent "mitigation" and for the alleged losses to be
deducted accordingly by reference to the relative sizes of the lands
involved in Phase 1 was unsatisfactory. There was definitely some element
of speculation and conjecture in adopting such a formula to determine the
final award of damages made here.
215
(11) There ought to be a proper process of assessment of the Plaintiff’s claim

for damages under the head of claim categorised on "loss of profit/gain
at completion of Phase 1". Parties ought to be given an opportunity to
fully address this issue of the proper quantum of damages to be awarded,
including whether there ought to be any adjustment for ‘mitigation’ and if
so, how it ought to be determined. The actual extent of the investment or
financial commitment/outlay involved on the part of the Plaintiff in respect
of the Phase 1 development up to point of the breach of the agreement by
Cheah Kongsi ought also to be considered. It was trite that the damages to
be recoverable by the Plaintiff should always be reasonable and not result
in ‘unjust enrichment’ of the Plaintiff.
216
Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd
Petronas Penapisan (Melaka) Sdn Bhd v

Ahmani Sdn Bhd
ROHANA BINTI YUSUF JCA, HAMID SULTAN BIN ABU BACKER JCA, PRASAD
SANDOSHAM ABRAHAM JCA
17 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 217
The Appellant had appointed the Respondent in a project to extend its warehouse.
Subsequently, the Appellant issued a termination notice to the Respondent. The
Respondent challenged the notice and the dispute was referred to arbitration.
The Appellant counterclaimed for additional costs of RM357.419.80 incurred
in completing the balance of works left uncompleted by the Respondent. The
arbitral tribunal (‘Tribunal”) found that the Appellant had acted reasonably and
fairly in terminating the contract due to the Respondent’s breach. The tribunal
found that the Appellant had the right to appoint third party contractors
to complete the remaining 30% of the project. However, notwithstanding
the absence of evidence in relation to the proof of the sum paid to the third
party contractors, the tribunal went on to consider what was a fair amount
incurred by the Appellant to support its counterclaim. The tribunal used the
factor of ‘inflation’ in the absence of oral evidence to support the documents
for the benefit of the claimant. After considering that an inflation of 20% as
reasonable, the arbitral tribunal calculated the additional costs and awarded
the Appellant the sum of RM312,564.24 as additional costs incurred to complete
the remaining 30% of the works. It was this specific issue of inflation when
calculating the Appellant’s additional costs that the Respondent contended the
tribunal had gone wrong quite aside from its other contention that the tribunal
had awarded on an un-pleaded and unclaimed matter. The tribunal was said
to have gone wrong by dealing with a matter or issue which the Respondent
claimed was not brought up by the parties, that the parties were not alerted to
and invited to address, that the Award contained decisions on matters beyond
the scope of the submission to arbitration which contravened s 37(1)(a)(v) and
37(1)(b) of the Arbitration Act 2005 ("the Act"). It also raised questions of law
under s 42 of the Act. The Respondent thus applied to the High Court to set
aside or vary the Award under ss 37 and 42 of the Act. The High Court set aside
the tribunal’s decision on the counterclaim and the Appellant appealed to the
Court of Appeal.
(1) Section 37(1)(a)(v) of the Act would constitute the relevant provision
to apply in the light of the challenge by the Respondent. Section 37 only
217
allows the court to set aside the award, except for the limited exception
under s 37(3). In the instant case, since the High Court judge exercised her
powers to vary the Arbitral Award, the court could only proceed under
s 42 of the Act. However, the approach of the Judge to treat applications
under both sections as not being mutually exclusive was correct.
(2) The court must intervene where the award is manifestly unlawful and
unconscionable. Section 42 is not a provision as to appeals but a reference
on a question of law. The Court’s intervention should only be exercised in
clear and exceptional circumstances. With the pre-requirements of s 42,
there would be no danger of ‘opening the flood gates’ in respect of the
review of Arbitral awards.
(3) In the instant case, the High Court Judge was correct to have found a
complaint under s 42 of the Act made out. The point of inflation being
a gauge for work done in the counterclaim and summarily fixing the
rate at 20% was not a point raised during the proceedings depriving the
Respondent of an opportunity to address the Arbitral Tribunal on such
point that formed the basis of the award on the counterclaim.
(4) The first condition for an exercise of power under s 42 was whether
the questions referred to were questions of law. In the instant case, the
conduct of the Arbitral Tribunal in equating the cost of reasonable work
done to the inflation rate of 20% amounted to a substantial injustice and
was a question of law under s 42. The question or issue of law was whether
an Arbitral Tribunal could impose a percentage based on the inflation
rate to represent the cost of work done without a plea on that point and
no invitation for submissions on the same being called for from parties
through their counsel. The question or issue fell squarely as a question of
law set out under s 42.
(5) In the instant appeal the impact of the 20% inflation rate as costs of
reasonable work done, arose out of the award of the Arbitral Tribunal and
not out of the Arbitration.
(6) Parliament has intended a strict limitation on the role of Courts when
the choice of arbitration for dispute resolution has been made. Section
42, vests the court with the power to intervene. The pre-requisites to
s 42 clearly restrict the Court’s power to intervene. The Court should thus
always be slow in intervening in Arbitral awards.
(7) In a complaint relating to s 37 of the Act, the complainant needs to

demonstrate that the arbitral process was compromised and has nothing
to do with the grounds in the arbitral award. The threshold to succeed in
a s 42 application is extremely high. The courts have repeatedly said that
it will not interfere on the error of fact and/or law when it falls within
the jurisdiction of the arbitral tribunal unless such error results in ‘patent
injustice’.
218
Petronas Penapisan (Melaka) Sdn Bhd v Ahmani Sdn Bhd
(8) An application to set aside an award under s 37 largely deals with issues
relating to the award making process and has nothing to do with error
of facts and/or law on the face of record unless the exception applies;
such as public policy. An application under s 42 has nothing to do with
the award making process but has everything to do with the award per se
and error of law on the face of record which error substantially affects the
rights of one or more of the parties.
(9) When a party to the arbitration complains of a breach related to s 37(1)

(a)(iv) and or (v), he must invite the courts attention to s 37(6). He cannot
rely on s 42 as it would be an abuse of process, as he is relying on omission
or excess of jurisdiction which is covered under s 37 and not s 42 of the
Act.
(10) It would not be a proper exercise of judicial power to entertain an

application under s 42 when the applicant is relying on the same facts
as advocated for a s 37 application. A trial court ought not to entertain
an application under s 42 at all. If a party cannot succeed under s 37, on
the same facts and complaint, the general jurisprudence will dictate an
application under s 42 will also be futile as s 37 relates to arbitral process
and s 42 relates to arbitral award.
(11) In dealing with s 42, the Court must ensure that the Court process is not
abused and that the party autonomy concept as well as the principle
relating to finality of award is respected. To enable the Court to ensure that
the Court process is not abused, the section as well as case-law offer the
following guidelines: (a) the first step is to consider s 42(8) which relates
to security; (b) the second step requires the Court to ask the hypothetical
question of whether the purported question of law would substantially
affect the right of the parties; (c) the third step, which only arises if the
applicant succeeds in the second step is to require the applicant make
out a case of ‘patent injustice’ as a threshold requirement for the Court
to consider the application on merits under s 42; (d) the fourth step is to
deal with the merits; and (e) the fifth step will arise if the threshold as to
the merit is satisfied, and if so the court has to consider whether it is a fit
and proper case to remit the award to the arbitrator for reconsideration;
and (f) the final step is only to set aside or vary the order.
(12) A literal interpretation of s 42 of the Act, taking into consideration the

policy of Model Law as well as the Act requires the question of law to arise
out of the award. The applicant must demonstrate the question of law
looking at the award and not any other extraneous material. The court
must take the award at its face value. It is a strict test and s 42 as well
as the policy of the Act only requires the court to take a common sense
approach. Convoluted jurisprudence does not help in a party autonomy
concept where confidentiality as well as finality of the award plays a
crucial role for the court to decide whether or not it should intervene.
219
(13) In the instant case, the facts did not attract a reference under s 42 at all.
Since both parties have filed an application under s 37 as well as s 42,
the court would deal with the merit of the complaint without taking into
consideration the jurisprudence. On the special facts of the case and when
there was no complaint that s 42 was not applicable, it was wrong for the
arbitral tribunal to award damages when damages were not proven.
220
Senwara Development Sdn Bhd v Sabah Development Bank Bhd
Senwara Development Sdn Bhd v Sabah

Development Bank Bhd
CIVIL APPEAL NO: S–02(IM)–20–01/2014
ZAHARAH BINTI IBRAHIM JCA, MOHAMAD ARIFF BIN MD YUSOF JCA,
VARGHESE GEORGE JCA
9 DECEMBER 2016
_________________________
[2017] 1 CIDB-CLR 221
The instant appeal arose as a result of a dispute over non-payment of progress

payments in a building construction project. The Plaintiff / Appellant instituted
a claim in the High Court against two (2) Defendants / Respondents. The trial
Judge only allowed the Plaintiff to enter Judgment in the action against the
First Defendant and not against the Second Defendant. A counterclaim brought
by the First Defendant against the Appellant was dismissed. The Court also
dismissed the Plaintiff’s application for leave to further amend its Re-Amended
Statement of Claim, which application the Plaintiff only filed during the close
of submissions stage of the proceedings. The Plaintiff appealed to the Court
of Appeal against parts of the High Court’s judgment which, firstly, disallowed
its’ application to further amend the Re-Amended Statement of Claim, and
secondly, against the dismissal of the substantive action against the Second
Defendant. The substantive action against the Second Defendant was based on
non-payment of certain progress payments in breach of a Letter of Instruction
and the Second Defendant’s improper demand on a performance guarantee.
Held, allowing the appeal in part with costs to the Plaintiff:
(1) The Plaintiff’s pleaded cause of action against the Second Defendant was
wholly premised on the allegation that the Second Defendant had breached
the Letter of Instruction. By the proposed amendments, the Plaintiff was
seeking to include a new paragraph (paragraph 24A), which when read
in its entirety, had indisputably the effect of raising a further allegation
that the relationship between the Plaintiff, the First Defendant and the
Second Defendant was such that there existed an implied trust whereby
the Second Defendant was constituted as a “trustee” for the Plaintiff in
respect of such progress payments received from the Government by the
Second Defendant, to which the Plaintiff was beneficially entitled.
(2) Two (2) previous amendments had been applied for and allowed and the
instant application was brought at a late stage in the proceedings. The
Plaintiff’s attempt to effect further amendments to the Statement of Claim
was made after closing submissions had been filed by the Plaintiff, to get
around the Second Defendant’s objection that “trust” or “implied trust”
was never any part of the Plaintiff’s pleaded case.
221
(3) The Plaintiff’s application to further amend the Re-Amended Statement of

Claim was not made in good faith or on genuine grounds as all the related
facts were well within the knowledge of and available to the Plaintiff
all along but no steps had been taken earlier to amend the pleadings
despite the Plaintiff having had various opportunities to measure its own
evidence, and also the evidence of the Second Defendant, if such a state
of facts was required to be inferred and adjudicated upon by the Court.
The attempt to further amend being made at the concluding stage of the
proceedings was clearly after objections to the Plaintiff’s submission had
been raised by the Second Defendant.
(4) Concerning prejudice which might be caused to the Second Defendant that
could not be adequately compensated by costs, since the hearing had been
completed, the Second Defendant had been deprived of the opportunity
to cross-examine witnesses or present witnesses to dispel the notion of a
trust or implied trust arising from the relationship between the parties.
Even the agreed issues for trial submitted by the parties did not advert to
or give any indication that a case would be developed by the Plaintiff on
the basis of a “trust” or “implied trust” against the Second Defendant.
(5) If the amendments were to be allowed it would amount to a change in

the character of the suit as originally pleaded, namely, from imposing a
direct contractual liability on the Second Defendant allegedly premised
only on the Letter of Instruction, to allowing the suit to be pursued against
the Second Defendant on the basis of a different cause of action relying
on a plea supposedly that the Second Defendant was a “trustee” for the
Plaintiff for the monies received from the Government.
(6) There was no error in the exercise of the Court’s discretion in the particular
circumstances of the case, when the Judge dismissed the Plaintiff’s
application for further amendment to the Re-Amended Statement of
Claim. The decision of the Judge in disallowing the further amendments
was consistent with the recognised legal principles laid down by the
Courts when called to exercise such discretion as to whether to allow or
disallow amendments to pleadings. Further, the exercise of the Court’s
discretion against the Plaintiff was justified on the facts and pleadings
extant in the instant suit as explained by the Judge.
(7) The Letter of Instruction lacked, in so far as creating an obligation directly

on the Second Defendant, an express consent from the Second Defendant
to be bound to whatever arrangement that arose between the Plaintiff,
Maybank and the First Defendant. The Judge had rightfully held that on
the facts no case under the exceptions to the doctrine of privity had been
established by the Plaintiff. Further, shorn of any pleadings that premised
the Plaintiff’s claim on express or implied trust, the Plaintiff was precluded
from mounting a case on the basis of any “trust arrangement”. There was
no misdirection in law or error on the part of the Judge in coming to such
conclusion.
222
Senwara Development Sdn Bhd v Sabah Development Bank Bhd
(8) Based on the concessions that there were no demands on the First
Defendant’s Performance Bond given to the Government and further
there had not arisen any liability to pay damages to the Government
on account of the First Defendant’s obligations in respect of the Project
works, the Second Defendant was not entitled to make any demand on
the Maybank Performance Bond. Further since Maybank had paid out
the sum of RM1,150,000.00 to the Second Defendant, and admittedly the
Second Defendant had paid this amount to the First Defendant, it followed
that the Second Defendant should be held accountable to the Plaintiff to
the extent of that amount that had been wrongfully demanded and paid
out by the Second Defendant.
223
Syarikat Panon Sdn Bhd v Platinum Best

Engineering Sdn Bhd and Another Appeal
CIVIL APPEAL NOs: Q–02–2011–2011& Q–02-2012-2011
RAMLY BIN HAJI ALI JCA, ABDUL AZIZ BIN ABDUL RAHIM JCA, MOHD
ZAWAWI BIN SALLEH JCA
19 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 224
The Plaintiff (PSB) commenced two suits against the Defendant (PBE) to recover,
inter alia: (i) monies owing under several payment certificates; and (ii) monies
not certified or under-certified for certain variation works. PBE counterclaimed
against PSB in both suits. The High Court allowed in part PSB’s claims in both
suits but dismissed both the counterclaims of PBE. The parties appealed. PBE
filed appeal 2011 against the decision allowing PSB certain reliefs in both suits
and against the dismissal of both its counterclaims. PSB also filed appeal 2012
against specific findings of the High Court.
Held, allowing PBE’s appeal with costs but dismissing PSB’s appeal with costs:
(1) The trial Judge should have made a determination what was the actual
amount payable after taking into account the amounts owing under the
relevant interim payment certificates and other sums owing between the
parties. Based on the interim certificates PSB had applied for summary
judgment to the Court. But the application was rejected. This showed that
PSB needed to prove the amount certified in the certificates or the amount
that was not certified. More importantly PSB never appealed against that
decision. Thus, on the balance of probabilities, the interim certificates
were neither final nor conclusive. Therefore this part of the appeal by PSB
ought to be dismissed.
(2) As regard to PSB’s claim for the return of the retention sum, PSB was not
entitled to the retention sum. This was because firstly, it was a fact that
PSB never completed the work. Secondly, with regard to the termination,
PSB in its claim had pleaded for damages for wrongful termination. But,
the High Court Judge refused this claim and it was not pursued by PSB
in the Court of Appeal. This gave the inference that PSB had accepted
the termination of the contract as valid for its failure to complete the
works. Therefore, it could not be right to say that PSB could rely on the
termination of the contract to justify the return of the retention sum.
Moreover, it was in evidence that PBE had spent moneys on ratification
works after taking over the works that were supposed to be completed
by PSB after the termination. PSB in Appeal No 2012 was not entitled to
224
Syarikat Panon Sdn Bhd v
Platinum Best Engineering SdnSyarikat
Bhd andPanon SdnAppeal
Another Bhd v
the return of the retention sum and accordingly the appeal ought to be
dismissed.
(3) The two counterclaims in the suits merged into one wherever there was
duplicity. More so when the counterclaims substantially arose from the
same set of facts. Thus, the presence of duplicity in the counterclaims
was not a valid ground for the trial Judge to dismiss the same. The Judge
ought to have considered whether the claims were proven. If proven then
they should be allowed to the extent that the claims were justified by the
proven facts and the evidence by having regard to the purported duplicity.
(4) The trial Judge had not adequately exercised judicial appreciation of the
evidence in so far as it related to PBE’s counterclaim. In consequence, the
Court of Appeal would disagree with the trial Judge’s decision to dismiss
PBE’s counterclaim for the sum of RM9,299,821.01.
225
Tan Ah Kek & Anor v Wong Thang Song & Anor

CIVIL APPEAL NO: B–02 (NCVC) (W)–2609–12/2013
ALIZATUL KHAIR BINTI OSMAN KHAIRUDDIN JCA, ABDUL AZIZ BIN ABDUL
RAHIM JCA, DAVID WONG DAK WAH JCA
24 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 226
The Appellants/Plaintiff were the registered owners of a piece of land (“the

said land”). On 1 December 2006 the Appellants entered into a lease agreement
(“the said agreement”) with the Respondents/Defendants under which the
Respondents were allowed to occupy the said land for a period up to 31 October
2024 for a monthly rental of RM1,800.00. Clause 5.3 of the said agreement
allowed the Respondents to build a steel structure factory (“the factory”) for
commercial use on the said land; but the Respondents had to comply with all the
regulations prescribed by the relevant authorities in relation to the construction.
The condition for the land use at the material time was ‘agriculture’. Recital C of
the said agreement stipulated that the Appellants had to apply to the relevant
authorities for the conversion of the use of the said land from agriculture to
industry/commercial. The Appellants applied to convert the category of land
use of the said land from agriculture to industry/commercial. At the same
time the Respondents proceeded to build the factory on the said land. The
Appellants’ application for conversion was refused and the permission from the
relevant authorities was never obtained, the reason being the factory had been
built encroaching onto the neighbouring land. Six years after the execution of
the said agreement, disputes arose between the parties and the Appellants
commenced an action against the Respondents claiming for vacant possession,
mesne profits till the surrender of vacation possession, general damages
and cost of demolition of the factory. The Appellants contended that the said
agreement contravened s 24 of the Contracts Act 1950 (“the Act”) because the
category of land use was ‘agriculture’ and therefore the construction of factory
on the said land was not permitted. Illegality of the said agreement was not
pleaded but was raised at the end of the trial. The learned High Court judge had
dismissed the Appellants’ claim and hence this appeal.
Held, allowing the appeal and ordering vacant possession to be delivered

within 90 days with each party bearing their own costs:
(1) It is settled law that the Court may take cognizance of an illegality in an act
or contract even if the illegality is not pleaded.
(2) The Appellants were not attempting to enforce the said agreement in
the sense that the Appellants wanted the Respondents to fulfill their
226
Tan Ah Kek & Anor v Wong Thang Song & Anor
obligations under the said agreement. Rather, the Appellants were seeking
an order to have the said agreement nullified because it was void under
s 24 of the Act.
(3) The object of the said agreement was to enable the Respondents to build
the factory to be sublet to third party. Under the existing express condition
of category of land use of the said land this objective could not have been
fulfilled and the construction of the factory on the said land could not be
done without the condition of land use being changed.
(4) Whatever the motive of the Appellants in complaining only six years
after the execution of the said agreement was irrelevant. What was illegal
remained illegal whether the complaint was taken early upon discovery of
the illegality or very much later.
(5) The Respondents were not entirely blameless. Knowing that the said
land use was agriculture and would require approval to convert it for
industrial or commercial use, the Respondents, nevertheless, went ahead
to build the factory on the said land in contravention of the condition of
land use and therefore were in breach of s 115 of the National Land Code
1965. To compound the matter, there was no evidence to show that the
Respondents had obtained approval for the construction of the factory
from the relevant local planning authority.
227
Tridant Engineering (M) Sdn Bhd v Ssangyong

Engineering & Construction Co Ltd*
4 AUGUST 2016
_________________________
[2017] 1 CIDB-CLR 228
The Respondent was appointed as main contractor by the Employer in respect of

a building project. The Appellant was the Employer’s nominated subcontractor
in respect of certain electrical works. The Respondent on 9 September 1999
entered into two (2) subcontracts with the Appellant in respect of the electrical
works. Disputes arose between the Respondent and Appellant concerning
payment due on several payment certificates. The Appellant instituted arbitration
proceedings in July 2012 claiming the sums due to it. The Respondent denied the
claim on two (2) grounds: (1) it was not liable to pay the Appellant since it (the
Respondent) had not been paid by the Employer; and (2) the Appellant’s claim
was time-barred. The Arbitrator at the end of the proceedings held inter alia:
(a) the Respondent was not entitled to withhold payment; (b) the ‘pay when
paid’ clause did not prevent the Appellant from claiming since the Respondent’s
liability to pay the Appellant was not dependent on the Respondent’s receipt of
sums from the Employer; and (c) although the Appellant’s claims were time-
barred under s 6 of the Limitation Act 1953 —time expired around mid-2007
or at least around mid-2008 — there was a postponement of the limitation
period pursuant to sub-s 26(2) of the Limitation Act 1953 to 25 March 2009 by
a valid acknowledgement in the form of a proof of debt filed by the Respondent
to a third party in respect of a debt owed by the Employer to the Respondent.
Such postponement extended the limitation time period to 24 March 2015 and
since the Notice of Arbitration was filed by the Appellant on 20 July 2012, the
claim was filed well within the limitation period. The Respondent applied to set
aside the arbitral award pursuant to ss 37 and 42 of the Arbitration Act 2005.
The Respondent’s application was sustained by the High Court. The Appellant
thus appealed to the Court of Appeal. The two (2) issues requiring the Court of
Appeal’s determination were: (i) whether the High Court Judge was correct in
finding that the Arbitrator had decided on a matter outside his term of reference
— ie, the postponement of the limitation period of the debt claimed — resulting
in an exercise in excess of his jurisdiction; and (ii) whether the High Court Judge
was correct in finding that the Arbitrator had erred in finding that the proof of
debt lodged by the Respondent had postponed the limitation period of the debt
claimed pursuant to ss 26 and 27 of the Limitation Act 1953.
228
Tridant Engineering (M) Sdn Bhd v
SsangyongTridant
Tridant Engineering (M) Sdn Bhd v Ssangyong Engineering
Engineering
Engineering & (M) SdnCo
& Construction
Construction Bhd
Co v
Ltd
Ltd
(1) An arbitral proceeding is not a Court proceeding where there is in

existence a specific legal procedural regime regulating its process.
Arbitration is an alternative dispute resolution module where disputes
are resolved by legally and non-legally trained adjudicators. Arbitration is
conducted with greater flexibility and freedom from the rigid procedures
of litigation in the judicial system. Further, in any arbitral proceeding, the
primary concern is to ensure that the rules of natural justice are complied
with.
(2) In the instant case the Appellant’s failure to plead ss 26 and 27 of the
Limitation Act 1953 was not fatal to its claim as the Respondent was given
every opportunity to submit on that issue. There was also no evidence to
say that the Respondent had suffered a disadvantage or was deprived of
an opportunity to ventilate that issue. In fact, the Judge had found that the
rules of natural justice had not been breached on the issue.
(3) Even though ss 26 and 27 of the Limitation Act 1953 were not formally
pleaded, the pleadings as they stood were adequate to put the Respondent
on notice of the issue of postponement of the limitation period. It was
undisputed that the defence of the Respondent in the alternative was
that the Appellant’s claim was time barred by virtue of the Limitation Act
and once that issue of limitation was put on the table, the Appellant was
fully entitled to avail of any means to rebut the defence of limitation. The
Respondent’s complaint of not having pleaded the aforesaid sections of
the Limitation Act was misconceived.
(4) As long as there has not been any breach of the rules of natural justice and
parties had been given ample opportunity to submit on the issue which
was ancillary to the claim or defence, the strict rule of pleadings does not
apply in the arbitral regime. In the instant case, the reliance on sections
26 and 27 of the Limitation Act was a matter ancillary to the alternative
defence of the Respondent. The Arbitrator was perfectly within his right
to determine the issue of postponement of limitation period which was
closely connected to the defence of limitation.
(5) Concerning the question of an acknowledgement in the form of a proof of

debt postponing the limitation period, the manner in which the question
of law was framed was nothing more than a mixed question of law and
fact ‘dressed up’ as a question of law. The Court has no jurisdiction to a
mixed question of fact and law.
(6) The modern approach of the Courts towards arbitral awards dictates
that unless the award is clearly and obviously tainted with some sort of
illegality such that it would not be conscionable for the Courts to allow
the same to stand, there will not be any intervention. This approach is
229
nothing more and nothing less than giving effect to the very bargain
which the parties had agreed to. When parties resort to arbitration to
resolve a dispute, they are in fact choosing an expert in the area of dispute
to give a final and binding "referee’s decision". To allow the losing party
to now question the expert’s findings would destroy the very foundation
of an arbitration agreement. The Courts do not sit in an appellate function
when hearing references from arbitral proceedings. Their function is only
one of very limited supervisory nature.
(7) In the instant case, the question of law as framed by the Respondent
before the High Court Judge was flawed and should not have been allowed
by the Judge. It was unnecessary to answer the question as to whether the
Arbitrator’s interpretation of the law and fact was correct in law.
(8) Arbitral awards once registered with the Courts are elevated to the status
of a Judgment from the Courts with all the benefits of execution provided
by law. The fact that the Arbitration Act 2005, among others, now gives an
Arbitrator the right to determine his or her jurisdiction and give interim
measures, meant that an arbitral tribunal has practically all the trappings
of a judicial body. By inference, Parliament has in its wisdom deemed it fit
to allow disputing parties in the commercial world to settle their disputes
outside the judicial process and that has to be respected.
_____________________________________
* For the case summary on the High Court decision, see Ssangyong Engineering & Construction
Co Ltd v Tridant Engineering (M) Sdn Bhd [2016] 1 CIDB-CLR 288 (published in CIDB
Construction Law Report 2015).
230
Advancecon Holdings Sdn Bhd v
Tridant Engineering (M) Sdn Jasin
Bhd vConstruction Advancecon
Ssangyong Engineering Holdings
& (M)
Development Sdn&Co
Construction
Sdn Bhd Bhd v
Ltd
Anor
Advancecon Holdings Sdn Bhd v Jasin Construction

Development (M) Sdn Bhd & Anor
HIGH COURT, JOHOR BAHRU
WRIT NO: 22C–1–06/2013
TEO SAY ENG J
7 MAY 2016
_________________________
[2017] 1 CIDB-CLR 231
The Plaintiff was appointed by a Joint Venture (“JA”) to carry out and complete
two (2) projects, namely the Phase 1 Project and the B7 Project. In respect of
Phase 1, the Plaintiff alleged that it had submitted a total of 13 progress claims
but only 9 certificates of payment were issued by JA, as a result of which the JA
was indebted to the Plaintiff for a sum of RM2,276,100.14. The Plaintiff also
claimed that its defect liability period had ended and thus a retention sum of
RM178,511.78 was also due and owing to the Plaintiff. In respect of the B7
Project, the Plaintiff claimed that the JA owed the Plaintiff a sum of RM80,691.94
in respect of completed works and that further, a retention sum of RM36,097.50
was also due and owing to the Plaintiff. Thus, the Plaintiff claimed the sums
arising out of both the Projects from the Defendants — the partners of the JA.
Held, allowing the Plaintiff’s claim but dismissing the First Defendant’s
counterclaim, with global costs of RM30,000 to the Plaintiff:
(1) The First Defendant contended that the claim and payment for the
Plaintiff’s work was raised and ventilated in the arbitration proceedings.
However, a perusal of the arbitration award clearly showed that the
Plaintiff’s claim against JA was not an issue to be decided in the arbitration
proceedings. The Plaintiff was not a party to the arbitration proceedings.
Although the Second Defendant was the parent company of the Plaintiff
and it shared common directors and shareholders with the Plaintiff, the
Second Defendant and the Plaintiff were separate legal entities. Hence any
ruling made, even if it concerned the Plaintiff could not bind the Plaintiff.
(2) From the evidence adduced in totality, the Plaintiff had proven its claim
against the Defendants on the balance of probabilities.
(3) From the evidence adduced through DW3 (the licensed land surveyor)
and its witnesses, the First Defendant failed to prove its counterclaim
on a balance of probabilities against the Plaintiff. Hence, the Defendant’s
counterclaim against the Plaintiff ought to be dismissed.
231
Amalan Lengkap Sdn Bhd v

SKS Coachbuilders Sdn Bhd
HIGH COURT, MELAKA
WRIT OF SUMMONS NO: 22NCVC–11–03/2016
VAZEER ALAM MYDIN MEERA J
2 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 232
The Plaintiff claimed damages against the Defendant, for breach of a building
contract dated 11 March 2011, in respect of works executed and completed by
the Plaintiff in constructing a factory at Dengkil, Selangor for the Defendant.
The Defendant counterclaimed against the Plaintiff for damages in respect of
defective works. The Plaintiff had filed its suit in the High Court at Melaka. The
Defendant filed two (2) applications (Encls 5 and 8) to transfer both the main
claim and counterclaim to the High Court at Shah Alam, Selangor. In submitting
that the forum conveniens was the High Court at Shah Alam and not Melaka, the
Defendant argued that: (i) the Defendant’s registered address was in Puchong,
Selangor; (ii) the subject matter of the suit was in Selangor; (iii) the cause of
action arose in Selangor; and (iv) its witnesses were residing in Selangor. The
Plaintiff in opposing the applications, maintained that: (a) its (the Plaintiff’s)
own office was in Melaka; (b) payments by the Defendant in respect of the
building contract were to be made to the Plaintiff at its office in Melaka; (c) the
breach by the Defendant occurred in Melaka; and (d) the cause of action arose
in Melaka.
Held, dismissing both the Defendant’s applications with costs:
(1) The High Court in Malaya has the jurisdiction to try all civil cases within
its local jurisdiction, i.e. the territory comprised in the eleven states and
the Federal Territory in the Peninsula. Each branch of the High Court in
Malaya located in any state has concurrent jurisdiction to adjudicate upon
any civil proceedings regardless of whether the cause of action arose in
another state.
(2) In considering an application for transfer of proceedings on grounds

of proper or convenient forum, the Courts have had regard to, amongst
others, the issue of where the cause of action arose, the Defendant’s place
of residence, the hardship to parties, and interests of justice. The grounds
for considering the appropriate forum are codified and set out in s 23(1)
of the Courts of Judicature Act 1964. The principle of forum non conveniens
is further embodied in O 57 r 1 and r 4 of the Rules of Court 2012.
232
Amalan Lengkap Sdn Bhd v SKS Coachbuilders Sdn Bhd
(3) In construing the appropriateness of forum, the Court would have to

have regard to the matters stipulated in O 57 r 4; and determine if in the
interest of justice the matter ought to be transferred or remain in the
Court of origin. One determinant used by the Courts in construing this
issue is the proximal nexus of the dispute to the Court in question.
(4) In the instant case, the Plaintiff’s pleaded cause of action arose in Melaka.
The facts pleaded by the Plaintiff showed that there was a demand made
by the Plaintiff for the Defendant to make payment of the balance due
under the contract. In a contract that involves the payment of money,
the breach occurs when there is failure to pay; and the cause of action
accrues at the place where the payment is to be made. In the instant
case, though the contract itself did not stipulate the place of payment, it
would be reasonable to surmise that any payment due under the contract
would naturally be payable at the Plaintiff’s office in Melaka. When the
Defendant failed to make the payment as demanded by the Plaintiff, the
breach would have occurred in Melaka, i.e. where the office of the Plaintiff
was situated; and the cause of action would have arisen in Melaka. The
Plaintiff’s claim would, as such, come well within the ambit of O 57
r 4(a)(A) of the Rules of Court 2012. Whether the ‘suitability or
appropriateness’ test or the ‘proximal nexus’ test was applied, the High
Court in Malaya at Melaka would be the appropriate forum to adjudicate
the instant dispute.
(5) The fact that the Defendant had raised a counterclaim for defective works,
would not be grounds to move the forum of adjudication from Melaka to
Shah Alam. The burden was on the Defendant to satisfy the Court that the
High Court in Malaya at Shah Alam was the appropriate forum. Having
considered the affidavits and the grounds forwarded by the Defendant in
support of the application, there were no compelling reasons to transfer
proceedings to the High Court in Malaya at Shah Alam, merely because of
the counterclaim, where the cause of action allegedly arises in Selangor.
The counterclaim would have to be adjudicated together with the main
claim, as a counterclaim was substantially a cross-action against the
Plaintiff arising from the same facts as were to be investigated in the
action, and the relief claimed was sufficiently connected with the subject
matter of the main claim so as to make it necessary in the interest of
justice that it should be dealt together with the principal claim. It made
no sense at all for the main claim to be tried in the High Court in Malaya
at Melaka and the counterclaim to be tried at the High Court in Malaya at
Shah Alam.
233
Asean Bintulu Fertilizer Sdn Bhd v

Wekajaya Sdn Bhd
ORIGINATING SUMMONS NO: 24C (ARB)–7–02/2015
LEE SWEE SENG J
18 JULY 2016
_________________________
[2017] 1 CIDB-CLR 234
The Plaintiff, Asean Bintulu Fertilizer Sdn Bhd (“ABF”), had engaged the
Defendant, Wekajaya Sdn Bhd (“WSB”) to carry out the construction of a new bulk
urea storage building (“the Works”). ABF issued an invitation to bid (“ITB”) for
a fixed non-escalating lump sum type contract for the project. The ITB allowed
for a Provisional Sum for 25,000 m3 for hard rock excavation. WSB quoted a
separate sum of RM2 million as Provisional Sum for hard rock excavation in the
event that hard rock was encountered during the performance of the excavation
works at the unit rate of RM80.00/m3. According to WSB, during a Techno-
Commercial Meeting, ABF and Protek Engineer Sdn Bhd (“Protek”) who was
the designer of the project, verbally made representations to WSB that the rock
quantity on the project site was non-existent or negligible. In reliance on this
representation and/or warranty, WSB reduced the unit rate of rock excavation
from RM80.00/m3 to RM50.00/m3. According to WSB, during the execution of
the Works, it encountered several principal delay events for which it was not
responsible. That had caused delay in the Works. Parties proceeded to refer the
dispute to arbitration. WSB was the Claimant and ABF the Respondent in the
Arbitration. The issues referred to arbitration, inter alia, were: (i) whether WSB
was entitled to an extension of time as a result of the discovery of the rock; (ii)
whether ABF had misrepresented any material facts or had given any warranty
as to the amount of rock on site. The arbitration hearing was protracted and the
Arbitrator only handed down the Final Award after a delay of some four years
from the date of last submission of the parties. The Arbitrator substantially
decided in favour of WSB and dismissed the whole of ABF’s claims. ABF, being
dissatisfied with the Final Award, applied to set aside the Award both under ss
37 and 42 of the Arbitration Act 2005 (“the Act”) by way of two (2) separate
Originating Summonses. Under the s 37 application, ABF had applied to set
aside the Final Award on ground of public policy in that the Arbitrator had taken
four years to hand down his Award. ABF also applied under s 37 to set aside the
Final Award on ground that the Arbitrator’s determination of the issues raised
had been made in breach of natural justice when the Arbitrator considered
matters that were not pleaded and further that he had reached conclusions that
were not supported by the facts, evidence or the law when he failed to consider
the arguments put forward by ABF properly or at all. Under the s 42 application,
the questions of law raised for determination were inter alia: (a) where a
construction contract included a Provisional Sum item whether the contractor
234
Asean Bintulu Fertilizer Sdn Bhd v Wekajaya Sdn Bhd
could claim an extension of time if it carried out these provisional sum works;
(b) whether as a matter of law if the contract required a party to inspect the site,
could it derogate its responsibilities by relying on the alleged representations
made by other party?; (c) whether the Arbitrator was correct in law to grant the
Respondent pre-award interest amounting to RM10,975,407.69.
Held, dismissing AFB’s application in part:
(1) One has to distinguish between what was not in the public interest and
what was public policy. That which was not in the public interest need
not amount to a breach of public policy. It was certainly not in the public
interest for an Arbitrator to have delayed four years in handing down his
Award.
(2) The parties were partly responsible for the delay in not having taken pro-
active steps in constraining the Arbitrator to deliver his award earlier
though all said, the ball was chiefly at the feet of the Arbitrator. ABF was
content to wait as until an Award was given, and here in favour of WSB,
it would not need to pay any monies out and indeed the amount not
paid out, could be reinvested in other projects. Having decided to wait,
willingly if not reluctantly, both parties had lost their right to complain on
account of delay with respect to the delivery of the Award.
(3) The Arbitrator had not relied solely on the oral evidence to find as a fact that
ABF made a representation to WSB. This finding of fact was made based
also on documentary evidence. The Arbitrator had analysed the evidence
by listing the itemised documentary evidence as well as reproduction of
relevant parts of the transcript which he relied on to support its findings.
The Arbitrator’s ability to decide on the case was not compromised by the
delay.
(4) The Arbitration in the present case was an ad hoc arbitration. There was
no specific procedural rules adopted nor was there any specific timeline
in which the Arbitrator has to render its Award. In an ad hoc arbitration,
the Arbitrator has a complete discretion on how the arbitration is to be
conducted so long as the procedure adopted did not offend the rules of
natural justice.
(5) Although the concept of public policy is not exhaustively defined, it is not
a license to vagueness, ambiguity or fanciful ideas. Any new category of
public policy must fall within the genre of categories already recognised
and the Court should be slow in expanding the recognised categories. The
recognised categories are fraud, corruption, bribery or breach of natural
justice. ABF had failed to establish that a delay in rendering an Award was
a breach of a recognised public policy or at least within the established
genre of categories of public policy in Malaysia or elsewhere.
235
(6) It is trite that an applicant challenging an arbitral award based on a breach

of public policy must: (a) identify the particular public policy which is
said to be conflicted; (b) provide evidence as to how it is conflicted and
(c) how the breach prejudiced their rights. No vague allegation that the
determination of the Arbitrator was inconsistent with Malaysian law and
the rule of natural justice and that the findings were purportedly not
supported by evidence and law, would suffice. An error of law or of fact
does not engage the public policy of Malaysia.
(7) An application under s 37 of the Act was not an appeal and the Court
could not go into the merits of the determination to examine as it were, its
correctness.
(8) The Court shall not venture into an Arbitrator’s pure province and
contradict his finding of facts, even if the Court was inclined to a different
finding and conclusion as that would fly in the face of settled principles
of law in that an Arbitrator’s findings of fact is sacrosanct. It is trite and
settled law that an Arbitrator is the master of facts and his factual findings
are final regardless of whether they are right or wrong.
(9) Even if there was a problem of sufficiency of evidence for the Arbitrator to
arrive at his findings, that was not a ground for setting aside the Award as
that was a matter within his province.
(10) It had not been shown how the determination of the Arbitrator had
breached the rules of natural justice in shocking the conscience or that it
was injurious to public good that would qualify as a breach of the public
policy of Malaysia. In the result the whole of the application to set aside
the Award under s 37 of the Act had to be dismissed.
(11) A question of law must be based on the factual findings and legal analysis
in an award. In other words the factual findings cannot be sought to be
altered by a so-called question of law. If the factual or legal premises on
which the question of law was based cannot be found in the Award, the
application under s 42 of the Act would be fatally flawed. A question of
law then cannot be premised on facts different from what had been found
by the Arbitrator. In such a situation, the questions of law would not arise
out of the Award as they cannot be related to the findings of fact and legal
analysis in the Award.
(12) In an application pursuant to s 42 of the Act, the applicant must proceed

with an unqualified acceptance of the findings of facts of the Arbitrator. It
was settled law that the court will not disturb the same as the Arbitrator
remained the master of the facts.
(13) The questions posed by ABF were not questions of law justifying the
intervention of the Court pursuant to s 42 of the Act.
236
Asean Bintulu Fertilizer Sdn Bhd v Wekajaya Sdn Bhd
(14) With respect to the quantum of damages, there was evidential basis to
support the finding of the Arbitrator.
(15) Interest may be claimed as a head of damages especially when one has
been kept out of one’s monies or where one has to incur charges mainly
in the form of interest charged for financing. However care must be
taken to ensure that what are essentially damages derived from interest
calculation does not on top of that carry another interest element again
as that would be a charge of interest upon interest. There should not have
been interest upon interest awarded on the Financial Charges that had
already had the interest element computed into it. The charging of double
interest is prohibited under s 11(a) Civil Law Act 1956.
(16) In a reference under s 42 on a question of law, unlike a setting aside under

s 37 of the Act, the Court is permitted to vary part of an Award as may
be affected by the error of law that had been proved to have applied to
the calculation of interest here. To allow double interest to be charged
would be to perpetuate an injustice on AFB and would be unconscionable
in the circumstances of the case. This was an error of law that satisfied
that requirement under s 42 of the Act wherein the Court was constrained
to excise the part of the award of interest affected and to leave intact the
unaffected part.
237
Berjaya Hills Berhad v Ainos Theos Sdn Bhd

HIGH COURT, TEMERLOH
CIVIL APPEAL NO: 12BC–01–06/2015
HASSAN ABDUL GHANI JC
3 MARCH 2016
_________________________
[2017] 1 CIDB-CLR 238
The Respondent (Plaintiff) was in a business of carrying out renovation works

on buildings and construction. The Appellant (Defendant) was an owner of a
resort. The Plaintiff had initially offered to do for the Defendant, painting and
replacing rotting wood at the Defendant’s resort rooms with Cengal Wood vide a
quotation of RM1.48m dated 29 March 2011. Through a second quotation dated
19 April 2011, the Plaintiff had made a new offer to the Defendant to perform
the said works by using Red Meranti Wood for RM1.42m. The Defendant agreed
to the second quotation and issued a Letter of Acceptance dated 19 April 2011
to the Plaintiff. After the work had commenced the Defendant discovered that
the Plaintiff had painted the rotting wood without replacing it and had used
Kempas wood instead of Red Meranti wood. The Defendant was not satisfied
with the Plaintiff’s work and subsequently issued a letter of objection instructing
the Plaintiff to use Cengal wood and not Red Meranti wood as agreed in the
Letter of Acceptance dated 19 April 2011. The Plaintiff emphasized through
their letter dated 6 June 2011 to the Defendant that they were agreeable to
follow the instructions of the Defendant subject to an additional cost of the
Cengal Wood amounting to RM300,000.00. The Plaintiff completed the said
works and claimed the total outstanding for works completed amounting to
RM 300,000.00. The Defendant was not satisfied with the works carried out
by the Plaintiff because there was a delay in completion and counterclaimed
for RM855,750.00. The Sessions Court allowed the Plaintiff’s claim with cost to
follow scale and dismissed the Defendant’s counterclaim with also cost to follow
scale. The Defendant thus appealed to the High Court. The High Court was of
the view that the issues to be decided were: (i) Whether the instruction given
by the Defendant to the Plaintiff to alter the type of wood from Red Meranti
wood to Cengal wood amounted to a Variation Order (“VO”) and whether the
Plaintiff had a right to a separate claim for the Cengal wood works amounting
to RM300,000.00; (ii) whether there was delay in completing the said works by
the Plaintiff which would entitle the Defendant a right to claim liquidated and
ascertained damages (“LAD”); and (iii) the amount of LAD which the Defendant
was entitled to.
Held, allowing in part the appeal and counterclaim with costs:
(1) The instruction by the Defendant to the Plaintiff to alter the type of wood
from Red Meranti Wood to Cengal Wood in accordance with the Contract
238
Berjaya Hills Berhad v Ainos Theos Sdn Bhd
which was agreed to by the parties, subsequent to finding out that the
Plaintiff had used Kempas wood, amounted to a Variation Order. Since
Cengal wood was not an item which was agreed to in the initial Contract,
the Plaintiff had a right to make a separate claim against the Defendant.
The decision of the Sessions Court Judge (“SCJ”) was accurate when it
decided on a balance of probabilities that the Plaintiff had succeeded in
proving its case and allowing the Plaintiff’s claim accordingly.
(2) The SCJ however had erred when deciding that the Plaintiff had proven
its claim of RM300,000.00 against the Defendant. This was because
the amount which was awarded was contrary to the evidence before
the Court. The Sessions Court in its judgment had not provided any
justification for allowing the claim in favour of the Plaintiff when at all
times the Defendant had not agreed to the said amount. The Plaintiff had
failed to lead any evidence in support of its claim for RM 300,000.00.
There was no evidence to show that the cost of the Cengal wood had
drastically increased causing the cost of the said works to increase by five
fold. The Session Court decision was thus set aside. The amount granted
to the Plaintiff was only a sum of RM60,000.00.
(3) The SCJ had erred when it dismissed the Defendant’s counterclaim.
According to the Contract the Plaintiff was supposed to complete the said
works on 24 July 2011, but the evidence before the Court was that the
Plaintiff only completed the said works on 14 November 2011, which
meant a delay of about 120 days. The Plaintiff had failed to give good
reasons for the delay. Therefore, in accordance with cl ‘e’ of the Letter of
Acceptance, the Plaintiff was responsible to pay damages to the Defendant.
The SCJ had thus erred in deciding on the balance of probabilities that
the Defendant had failed to prove its case and dismissing the Defendant’s
counterclaim with cost.
(4) The words used in clause e were clear and it showed the intention of both
parties when entering the said Contract. The words clearly said that LAD
was to be imposed at the rate of RM250 per day in the event the Plaintiff
failed to complete the said works on 24 July 2011. The amount allowed
was RM250 x 104 days=RM26,000.00.
_____________________________________
NOTE: The original judgment of this case is written in Bahasa Malaysia. In order to standardise
the language used in this publication, the summary of the case has been translated into
English.
239
Crest Worldwide Sdn Bhd v

Mudajaya Corporation Berhad
29 JANUARY 2016
_________________________
[2017] 1 CIDB-CLR 240
By a Letter of Award (“LOA”) dated 19 May 2007, the Plaintiff appointed the
Defendant to construct and complete a project comprising a 44 storey block
(“the project”). The parties also entered into a substantial number of agreements
from 2007 to 2013. Amongst them was a Supplementary Agreement (“SA2”),
which revised the completion date of the project from 21 November 2013
to 30 March 2014. The Plaintiff subsequently filed two (2) suits against the
Defendant. In the first suit (“1st Suit”) the Plaintiff claimed that because of
the Defendant’s non-completion by or before 30 March 2014, the Defendant
was in total breach of the various agreements entered into between them. The
parties subsequently entered into a Settlement Agreement on 21 November
2014, which was confirmed and incorporated into a consent judgment on 24
November 2014, thereby amicably settling the 1st suit. Amongst the terms
agreed was that both parties undertook “to provide their fullest cooperation
to ensure that the parties’ respective works are properly coordinated so that
the works can be completed by the target completion date i.e. 30.5.2015…”.
However, on 2 April 2015, the Plaintiff issued a termination notice which, inter
alia, terminated the various agreements between the Plaintiff and the Defendant
and subsequently filed this second suit (“2nd Suit”). The Plaintiff claimed
that the Defendant was in breach when it did not complete the project by 21
November 2013. In essence, the Plaintiff claimed that the revised completion
date of 30 March 2014 agreed under the undated SA2 had nothing to do with
this 2nd Suit. The Plaintiff sought, inter alia, declaratory orders, compensation
and indemnity. Subsequently, the Defendant proceeded to file this application
under O 18 r 19(1)(a), (b) and (d) of the Rules of Court 2012 to strike out the
Plaintiff’s Statement of Claim (“SOC”) and action contending that the Plaintiff
had no reasonable cause of action; the claim was frivolous and vexatious; and
that the claim was an abuse of the process of the Court. The Defendant claimed
that the Plaintiff had no reasonable cause of action primarily because the action
was res judicata. According to the Defendant, when the 1st Suit was compared
with the present 2nd Suit, one would find substantially similar facts and reliefs
in both Suits.
240
Crest Worldwide Sdn Bhd v Mudajaya Corporation Berhad
Held, allowing the Defendant’s application with costs:
(1) The principle of res judicata and issue estoppel prohibited the duplication
or regurgitation of the same issues and facts through multiple actions
filed after the first action had determined not only those issues but
also all other likely related issues. To allow the same would be to allow
multiplicity of actions and litigation by instalments which will do nothing
but run havoc to the administration of civil justice. In the instant case,
the SOC that was filed by the Plaintiff in the 1st Suit and the SOC filed
in the 2nd Suit asked for the same remedy ie, for damages and refund
of the action proceeds. Both SOCs in both the 1st and 2nd Suits were in
substance identical, resting on the same facts and issues.
(2) The essence of the Plaintiff’s 1st Suit was about non-completion of the
project; so was its 2nd Suit. The only difference was the date relied on by
the Plaintiff for this same complaint. The matter of the completion date of
the project was dealt with and provided for in the 1st Suit. The last and
final revision of the completion date was to be found in the Settlement
Agreement and the consent judgment; and it stipulated that the date was
30 May 2015. Until and unless the consent judgment was set aside, that
consent judgment which was actually yet another contract between the
parties and thereby the completion date of the project by the Defendant,
remained valid and binding on both parties.
(3) All material and relevant facts which were relied on in both suits were
substantially similar. Since the two suits not only emanate from but rely
on the same factual matrix, the Court could not ignore the presence of the
consent order. The principle of res judicata applied.
(4) For all intents and purposes, the date of the completion had been revised
under the consent order from 21 November 2013 to 30 May 2015. In fact,
the date of 21 November 2013 was already revised to 30 March 2013 even
before the consent order and Settlement Agreement were inked.
(5) To allow the Plaintiff’s claim to stand would be to allow the Plaintiff to
contradict and circumvent the terms of the consent order. The Plaintiff’s
case was unsustainable by reason of the operation of the principle of
res judicata, and it would be an abuse of the process of the Court to allow
the suit to remain. It would furthermore be frivolous and vexatious to
allow the present claim to remain given that the issue of res judicata
clearly arose.
241
GDP Architects Sdn Bhd v Universiti Teknologi Mara

SUIT NO: 22C–48–08/2014
31 MARCH 2016
_________________________
[2017] 1 CIDB-CLR 242
The Plaintiffs, comprising a group of some twenty three (23) consultants from
various disciplines in the construction industry, were involved in the setting up
and construction of a second campus for the Defendant, Universiti Teknologi
Mara (“UITM”) (“the project”). The Plaintiffs claimed they had rendered
consultancy services in respect of the project for which they were yet to be
paid. This was denied by the Defendant who took the position that it had no
privity of contract with any of the Plaintiffs; that the claim was time-barred;
that the Plaintiffs in any case had been paid for services rendered; and that
there was no loss proved. The Defendant had appointed U-Wood as the main
contractor for the said project. U-Wood then had appointed the Plaintiff as the
main consultant vide Lead Consultant’s Agreement on 23 September 2002. The
Plaintiff appointed and engaged the services of several consultants to assist the
Plaintiff in the completion of the project via various sub-consultant agreements.
The Plaintiff was to be paid once U-Wood was paid. The Plaintiff was to be paid
100% of the consultancy fee upon settlement of the final accounts between
U-Wood and the Defendant. This arrangement however did not come to pass.
It was subsequently decided that the project would be implemented in phases.
For that, the Defendant and U-Wood entered into 3 separate formal contracts
based on JKR Standard Form of Design & Build/Turnkey Contract (PWD Form
DB/T edisi 2002). The contracts related to the construction of the infrastructure
works for Satellite A and B. None of those contracts involved Satellite C.
Subsequently, the remainder of the project was implemented using a different
mechanism awarded to parties that did not involve the Plaintiff. This meant
that the Plaintiff would not be paid full fees. The Plaintiff thus approached the
Defendant for payment and the Defendant took the position that it did not owe
the Plaintiff for the simple reason that there was no contractual relationship
between itself and the Plaintiff. The Plaintiff thus filed the present claim. The
issues arising for determination were: (i) whether there was a legally binding
contract between the Plaintiff and the Defendant; (ii) in the event there was a
legally binding contract, whether the Plaintiff’s claim against the Defendant was
time barred pursuant to s 6(1)(a) of the Limitation Act 1953; and (iii) whether
the Plaintiff was entitled to the claim herein against the Defendant for all works
completed pursuant to s 71 of the Contracts Act 1950 (“s 71”).
242
GDP Architects Sdn Bhd v Universiti Teknologi Mara
Held, allowing the Plaintiff’s claim with costs:
(1) The parties had chosen to arrange their legal status through the medium
of a design and build contract made with U-Wood and that the Plaintiff
would be engaged through that contract. The acts and dealings of the
Plaintiff with the Defendant or its representatives were all under that
cover and understanding. At no time was there a separate relationship
between the Plaintiff and the Defendant. The answer to the first issue was
therefore answered in the Defendant’s favour. Given the answer to the
first issue, the second issue therefore did not arise.
(2) A quantum meruit claim is made alternative to a contractual claim. Before

one can validly make a claim under s 71, the following conditions as
expounded in the Privy Council decision in Siow Wong Fatt v Susur Rotan
Mining Ltd & Anor [1967] 2 MLJ 118 must be satisfied: (a) The doing of
the act or the delivery of the goods must be lawful; (b) It must be done for
another person; (c) It must not be intended to be done gratuitously; and
(d) It must be such that the other person enjoyed the benefit of the act or
the delivery.
(3) The ultimate beneficiary of the Plaintiff’s work was the Defendant; and no
one else. The works had been amply shown and satisfactorily proved to
have been completed by the Plaintiff. It was just not possible or credible
for the Defendant to suggest that it derived no benefit from the Plaintiff’s
works. It was ultimately the owner of the project. The Defendant had
clearly utilized the work of the Plaintiff for without such work, there
could not possibly be any revision of the plans for Satellite C to start
with. Further, there was indirect corroboration by the Defendant’s own
evidence when it valued the Plaintiff’s works.
(4) When applying the principles of s 71, one should take a more robust
approach as opposed to a rigid literal interpretation and construction of
the law and the facts. The juristic roots of s 71 were after all in equity, now
emboldened in statute.
(5) As for the question of quantum, compensation is measured by the worth

of the work done. In such a claim, the Plaintiff is entitled to reasonable
cost of the work done and the money expended. The element of profit
does not enter into consideration.
(6) The quantum meruit claim may be contractual or it may be restitutionary.
(7) The Plaintiff had made out a case under s 71. The value of the Plaintiff’s
work should not be based on the amounts found in the contractual
arrangements that the Plaintiff had with U-Wood. It should be based on
the value of the work done. The Defendant itself had valued the work
done to be the sum of RM21,199,320.15.
243
(8) The claim was not time barred as the cause of action in restitution and
under s 71 was complete when the Defendant decided to implement the
works in such a manner as to put it beyond the reach of the Plaintiff. The
cause arose at that point and that was in 2013.
244
Gan Teck Khun & Anor v Chan Koi Hong @ Chang Koui Fang & Anor
Gan Teck Khun & Anor v Chan Koi Hong @ Chang

Koui Fang & Anor
HIGH COURT, KOTA BHARU
CIVIL SUIT NO: 22–141–07/2011
DATO' HAJI MOHD YAZID BIN HAJI MUSTAFA J
19 JANUARY 2016
_________________________
[2017] 1 CIDB-CLR 245
The First Plaintiff and the First Defendant were the directors and share holders
of Genap Indah Sdn Bhd (“GISB”), which carried out housing development
business. GISB had carried out a housing development called “Taman Delima
Indah”. The Second Defendant was appointed as the contractor for the said
project. The Plaintiff claimed that 8 units of terrace houses constructed by the
Second Defendant had to be demolished and rebuilt by the Second Defendant as
they had not been built in compliance with the approved plans, i.e. the building
set back did not meet the requisite 20 feet. The Plaintiff also pleaded that the
layout did not comply with the plans since the houses were not located on the
plots they were supposed to be built upon. The Plaintiff called two witnesses:
(i) the Consultant Engineer (“SP1”); and (ii) the architect who had prepared the
plans of the houses (“SP2”). The Defendant also called two witnesses: (a) the
Manager of Kumpulan Ikram, Cawangan Kelantan (“SD1”) who had signed the
“rebound hammer” test reports, which test had been carried out by SD2; and
(b) a Laboratory Assistant at Syarikat Kumpulan Ikram who had carried out the
“rebound hammer” tests upon the said houses (“SD2”).
Held, allowing the Plaintiff’s claim:
(1) All 8 units of the terrace houses had to be demolished. The Court accepted
the unrebutted evidence of SP2 and SP1, the expert witnesses who had
been involved with the said housing development. SP2 found that the
said houses had to be demolished due to serious defects, which defects,
especially the set back and layout, were not in accordance with the plans
and could not be rectified unless the houses were demolished. The
findings of SP1 and SP2 that all the houses be demolished were justified
with reasons which were not rebutted by the Defendants.
(2) The test carried out by SD2 was doubtful and was rejected. SD2 admitted
that he only carried out the test and was not the person competent to
make the report. SD2 carried out the “rebound hammer” test at only
one of the houses and did not state whether it was one of the 8 terrace
houses. SD2 carried out the test in the absence of SP1 and SP2, who were
the Consultant Engineer and Architect appointed and entrusted with the
responsibility in the supervision of the construction of the said houses.
245
SD2 only carried out the tests at the spots identified by the Second
Defendant’s representative.
(3) SD1’s evidence did not help the Defendants’ case because SD1 confirmed
that he had merely signed the “rebound hammer” test report based on
the report compiled by SD2. He was not present during the “rebound
hammer” test. The test report was marked as IDD, wherein it did not carry
evidential weight.
_____________________________________
NOTE: The original judgment of this case is written in Bahasa Malaysia and is titled "Gan Teck
Khun dan satu lagi lwn Chai Koi Hong @ Koui Fang dan satu lagi". In order to standardise the
language used in this publication, the summary of the case has been translated into English.
246
Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd & Another Case
Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd &

Another Case
ORIGINATING SUMMONS NOS: WA–24C–46–06/2016 & WA-24C-28-05/2016
LEE SWEE SENG J
14 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 247
Hasrat Gemilang Sdn Bhd (“Claimant”), who was successful in an adjudication,

filed this Originating Summons (“OS1”) as the Plaintiff to enforce the
Adjudicator’s Decision under s 28 of the Construction Industry Payment
and Adjudication Act 2012 (“CIPAA”). The Respondent in the Adjudication
(“Gazzriz”) was the Defendant in OS1. The Respondent had also sought to
set aside the said decision under s 15(b), (c) and (d) of CIPAA vide another
Originating Summons ("OS2") wherein Gazzriz was the Plaintiff and Hasrat
Gemilang the Defendant. By a Letter of Award (“the Contract”) the Claimant
was appointed by the Respondent as their subcontractor to construct a 21 story
service apartment building (“the Project”). The Contract was subject to the
terms of the Pertubuhan Arkitek Malaysia (“PAM”) Contract 2006 (Agreement
and Conditions of PAM Contracts 2006) (with Quantities). The Claimant’s
claim was for Interim Payment Certificate No 25 and No 26 pursuant to PAM
Contract 2006. The architect had issued the Certificate of Practical Completion
and the quantity surveyor had conveyed to the Architect the Interim Payment
Certificates No 25 and No 26 showing the amounts due as RM242,891.59 and
RM1,299,033.58 respectively. The Respondent failed to pay under the Interim
Payment Certificates No 25 and No 26. The Claimant served the Payment
Claim on the Defendant by A.R. Registered Post claiming the sums due under
the two Interim Payment Certificates. The Respondent did not reply by filing
a Payment Response. The Claimant then served the Notice of Adjudication on
the Respondent by A.R Registered Post. The Kuala Lumpur Regional Centre for
Arbitration ("KLRCA") appointed an Adjudicator to adjudicate the claim. The
Claimant served the Adjudication Claim to the KLRCA and Adjudicator together
to the Respondent’s solicitor but there was no reply from the Respondent.
The Adjudication Decision was then given based on the Payment Claims.
The decision was served to all parties and as no payments were made by
the Respondent, the Claimant filed OS1 for enforcement of the Adjudication
Decision. The Respondent then filed OS2 to set aside the Adjudication Decision
contending that: (i) they did not agree to the appointment of Adjudicator and
to the Adjudication; (ii) they did not execute the PAM Contract 2006; (iii) the
Contract Sum had been reduced considerably and that the amount owing was
much less than the amount claimed; (iv) there had been a serious breach of
natural justice in arriving at the Adjudication Decision; and (v) the Adjudicator
had not met the standard and criteria set by the KLRCA as a qualified Adjudicator
and as such the decision of the Adjudicator was null and void and of no effect.
247
Held, dismissing the Respondent’s application (OS2) and allowing the

Claimant’s application (OS1) with costs:
(1) Even if there be some truth in the Respondent’s assertion that the amount
owing to the Claimant should be a very much less amount, that so-called
error of the Adjudicator could not be attributed to a breach of natural
justice. The so-called fresh evidence was not before the Adjudicator. The
Adjudicator cannot reopen the Adjudication Proceeding after the delivery
of his Adjudication Decision and neither would the Court at this stage of
setting aside the Adjudication Decision under the limited grounds of s 15
of CIPAA allow so-called fresh evidence to be admitted.
(2) The requirements of natural justice are that both sides must be heard
before a tribunal hands down its decision. It was clearly not a case of
the Adjudicator refusing to hear the Respondent but there was nothing
forthcoming and filed by them and nothing to contradict the Claimant’s
claim. The Adjudicator was thus entitled to come to the decision that he
did and it would be an abuse of the Court’s process to now say that there
had been a breach of natural justice just because the Adjudicator decided
in favour of the Claimant based on the documents submitted.
(3) The Respondent’s dissatisfaction with the weight of evidence given by the
Adjudicator in the absence of documents to the contrary submitted by the
Respondent was not a matter that the Court could intervene and much
less interfere since it had nothing to do with natural justice and certainly
not a ground countenanced under s 15 of CIPAA.
(4) The PAM Contract 2006 need not have been executed by the parties so
long as parties in the Letter of Award which was in writing and executed
by the parties had referred to the PAM Contract 2006 in writing and
agreed to be bound by it.
(5) An unsuccessful party in an Adjudication must not simply raise the

ground of breach of natural justice in setting aside an Adjudication Award
just because that party disagrees with the interpretation of law or finding
of facts based on the evidence or both. That "error" if there be will have to
be corrected at arbitration or litigation. However the Respondent had not
proceeded with any arbitration or litigation to correct the so-called error
or wrong decision.
(6) An Adjudicator's finding of facts is not reviewable in a s 15 CIPAA application

to set aside the Adjudication Decision, more so when no Payment Response
and no Adjudication Response have been filed at all.
(7) If the Respondent had serious objection to the appointment of the said
Adjudicator on ground of competency, they should have made their
objection immediately. It was too late to object on ground of competency
248
Gazzriz Sdn Bhd v Hasrat Gemilang Sdn Bhd & Another Case
once the Adjudication Decision had been delivered unless the facts affecting
his competency was only discovered later and could not be discovered
with reasonable due diligence before the decision was delivered.
(8) The Respondent had to allude to clear evidence that the said Adjudicator
did not have the said professional qualification that he was said to
have, or that he did not have the proper certification as an Adjudicator
by the KLRCA, or that he was an undischarged bankrupt or that he had
committed a criminal offence within or outside Malaysia. Absent that, the
Respondent’s attempt to declare the Adjudication Decision as null and
void arising from what was alleged to be a failure to meet the competency
standard and criteria set by the KLRCA, was clearly spurious and bereft of
merits altogether.
249
Hamidah Fazilah Sdn Bhd v

Universiti Tun Hussein Onn Malaysia (UTHM)
SUIT NO: WA–22C–31–05/2016
LEE SWEE SENG J
21 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 250
The Plaintiff was a contractor appointed by the Defendant under a Design and
Build Contract ("the contract") with respect to the construction and completion
of a Multipurpose Hall based on the PWD Form DB (Rev 2007). The Plaintiff
had made various Interim Progress Claims which were paid by the Defendant.
The present action by the Plaintiff was for the sum of RM22,677,356.87 for
Additional Works. The Defendant’s stand was that these Additional Works fell
within the scope of the Contract and so were not payable. The Defendant further
contended that there was a delay of one year in the completion of the Works and
so they were entitled to late delivery charges (“LAD”) claim of RM747,300.00.
The present Enclosure 6 was an application by the Defendant for stay of the
court proceedings under s 10 of the Arbitration Act 2005 (“the Act”) pending
reference to arbitration. The Plaintiff contended that the Defendant had through
their solicitors written to the Plaintiff’s solicitors requesting for further and
better particulars of the Plaintiff’s Statement of Claim. This, the Plaintiff
submitted was “taking any other steps in the proceedings” disentitling them
under s 10 of the Act for an order for stay. The Plaintiff further contended that
the ambit of the arbitration clause (“clause 67”) in the said Contract Document
was that it was only confined to the dispute during, and before the completion
of the Works and not after the completion of the Works. It was argued that it did
not expressly state that the dispute after the completion of the Works should
be referred to arbitration. Further according to the Plaintiff, the Defendant
had merely refused to pay and as such there was no dispute that needed to be
referred to arbitration. The Plaintiff also raised the issue of whether clause 70.0
which provided for the governing law and agreement of the parties to submit
to the exclusive jurisdiction of the courts of Malaysia, negated the Arbitration
Agreement altogether on the grounds that the parties were to be deemed to
have abandoned arbitration in favour of litigation.
Held, granting a stay of proceedings pending reference to arbitration with costs:
(1) The context of the letter asking for further and better particulars must
be looked into to ascertain if the Defendant had evinced a clear and
unequivocal intention to abandon arbitration and to elect for litigation to
resolve the dispute that had arisen.
250
Hamidah Fazilah Sdn Bhd v Universiti Tun Hussein Onn Malaysia (UTHM)
(2) Paragraph 2 of the said letter started off by the solicitors for the Defendant
categorically stating that the action filed by the Plaintiff in the High Court
was inconsistent with the intention of the parties under clause 67 of the
Contract to proceed with arbitration to resolve all disputes arising in
connection with the Contract. Paragraph 3 of the said letter reiterated
that the reference should be to arbitration as agreed by the parties to the
Contract. The last paragraph in paragraph 6 ended with the note that the
Defendant shall apply for a stay of the proceedings pending reference to
arbitration pursuant to clause 67 of the Contract and that the Defence
be filed after the disposal of the application for stay. In such a context, it
could hardly be said that the request for further and better particulars of
certain paragraphs of the statement of claim that the Contract had been
signed under coercion and duress, was a further step in the proceedings
when all that the Defendant wanted was to understand the claim better.
The Defendant’s solicitors stated that the further and better particulars
were needed to help the Defendant prepare their Defence. This is to be
differentiated from filing a Defence as even when the claim should be
referred to arbitration, the Defendant would still need to prepare its
Defence.
(3) There was no prayers for an order for better and further particulars
to be furnished by the Plaintiff. At most the request for further and
better particulars in the whole context of the said letter was only an act
preparatory to taking a further step in the proceedings and not a further
step in the proceedings.
(4) There is no impediment to the Arbitrator deciding on the issue of the

validity of the arbitration agreement even though the Plaintiff had
raised coercion and duress in the execution of the Contract containing
the arbitration agreement. Section 18(1) of the Act provides that the
Arbitrator may rule on its own jurisdiction, including any objections with
respect to the existence or validity of the arbitration agreement.
(5) Under the Act, the word used is “shall”, signifying a clear shift towards
referring such a matter to arbitration and indeed making it mandatory as
opposed to the old Arbitration Act 1952 where the discretion was reposed
with the Court on whether or not to grant stay.
(6) When the general agreement in clauses 67.1 and 67.3 was worded widely
and expansively to cover any dispute or difference arising between the
parties out of or in connection with the contract that shall be referred
to arbitration, there was no reasonable and cogent excuse to then limit
the dispute and difference to that which arose before the completion of
the Works. In any event, the dispute here was with respect to the matter
arising before the completion of the Works.
251
(7) A dispute had arisen between the parties with respect to whether the
variation work was within the terms of the Original Contract or a variation
within the terms of the Contract. That was a matter for the Arbitrator to
decide in accordance with the terms of arbitration that the parties had
agreed under the Arbitration Agreement.
(8) The amendment made to s 10 of the Act is such that whilst previously the
Court had to determine if there was a genuine dispute to be referred to
arbitration, now the test is just whether or not there is a matter within the
scope of the Arbitration Agreement that is to be referred to arbitration.
(9) Clearly the parties could not have intended clause 70.1 to be read to oust
arbitration as the parties had once again expressly referred to an “award
of an Arbitrator” in clause 70.2 and about enforcement of an award in
clause 70.3. There was no contradiction between the applicability of the
Arbitration Clause in the Contract Document in clauses 67.0 and 70.0 in
relation to the submission of parties to the jurisdiction of the High Court.
252
ID Engineering (M) Sdn Bhd v Goldpage Assets Sdn Bhd
ID Engineering (M) Sdn Bhd v

Goldpage Assets Sdn Bhd
SEE MEE CHUN J
29 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 253
The Plaintiff had been appointed by the Defendant as contractor for a

building project. The Plaintiff later claimed against the Defendant for a
sum of RM756,197.32 and the payment of the second moiety retention of
RM354,748.24. The Plaintiff’s claim was based on a statement of final account
dated 25 January 2015 prepared by the Quantity Surveyor ("QS") and signed
by the Superintending Officer ("SO") who was also the Architect. The Plaintiff
applied pursuant to O 14A of the Rules of Court 2012 for the disposal of
the case on a point of law; inter alia that the statement of final account was
valid and enforceable pursuant to the PAM guidelines; and pursuant to the
statement of final account, the Defendant was indebted to the Plaintiff for
the sum of RM756,197.32 and the payment of the second moiety retention
sum of RM354,748.24. The Defendant resisted the claim on the basis that the
statement of final account was not valid as it had not been duly signed by the
SO and not supported by the relevant architects, and/or engineers’ instructions
for variation orders ("VO").
Held, allowing the Plaintiff’s application:
This was a proper case to be decided under O14A. The January statement of
final account had been signed by the Architect and the VOs in question had been
supported by the relevant documents.
253
Inovatif Engineering (M) Sdn Bhd v

Nomad Engineering Sdn Bhd
HIGH COURT, KOTA KINABALU
CIVIL CASE NO: LBN–24(NCVC)–12/12 OF 2015
RAVINTHRAN PARAMAGURU J
2 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 254
The Plaintiff subcontracted certain electrical works to the Defendant in

respect of a Project. The Plaintiff issued Purchase Order No. 009/03/11 dated
18 February 2011 to the Defendant. The subcontract agreement between
the Plaintiff and Defendant incorporated the terms and conditions of the
agreement between the Plaintiff and main contractor. The Defendant claimed
a further sum for additional works which increased the subcontract price. Two
further purchase orders were issued by the Plaintiff for the additional works.
The Defendant claimed that a further sum was outstanding. Upon the refusal of
the Plaintiff to pay such sum, the Defendant issued the Payment Claim pursuant
to s 5 of Construction Industry Payment and Adjudication Act 2012 (“CIPAA”)
on 23 June 2015. The Plaintiff did not issue a Payment Response under s 6 of
CIPAA. Thus a dispute had been deemed to come into existence under s 6(4)
of CIPAA. The parties failed to agree on the appointment of an Adjudicator
resulting in the KLRCA appointing an Adjudicator. The Adjudicator ordered the
Plaintiff to pay the Defendant a sum of RM1,615,000. The Plaintiff applied to set
aside the adjudication decision under the CIPAA. The Plaintiff relied on limbs
(b) — there was a denial of natural justice in that the Adjudicator refused to
consider the Plaintiff’s Adjudication Response because it was filed out of
time; (c) — the Adjudicator had not acted independently or impartially; and
(d) — the Adjudicator had no jurisdiction because there was no written contract
between the parties. The Defendant objected to the application on the basis
that it did not fall within the confines of s 15 of CIPAA.
Held, dismissing the Plaintiff’s application with costs:
(1) The CIPAA does not provide for an appeal mechanism to reverse the
decision of the Adjudicator. The Adjudication decision may be set aside
only on the narrow grounds provided under s 15 of CIPAA. The decision
cannot be reviewed on the merits.
(2) The phrase “contract in writing” should be given a liberal meaning and
should not be restricted to a “formal” contract. There was nothing wrong
in the assistance derived by the Adjudicator in referring to the circular
issued by the KLRCA (KLRCA CIPAA CIRCULAR 03) on the meaning of
“contract in writing”. Since a Purchase Order — regardless of the fact that
254
Inovatif Engineering (M) Sdn Bhd v Nomad Engineering Sdn Bhd
it could refer to another document or whether it is dated prematurely

pending execution of another contract — is a written document, it would
come within the meaning of a “contract in writing”.
(3) The overall scheme of the CIPAA emphasizes the importance of timelines
in order to ensure the success of the speedy payment mechanism. Thus,
it was logical that material must be available to the Adjudicator to justify
any extension of the stipulated timelines in the first place. Even in
ordinary civil proceedings, Courts would insist on valid grounds before
granting indulgence to extend time. In the instant case, as pointed out by
counsel for Defendant, no extension of time under s 25(p) was sought by
the Plaintiff. In the premises, the Adjudicator had correctly ignored the
belated Adjudication Response for breaching the stipulated timeline.
(4) Concerning the issue on breach of natural justice, the counsel for the
Plaintiff complained that he could not respond to a case authority that
counsel for the Defendant had included in his interrogatories because the
Adjudicator had delivered her decision two (2) days early. However, the
interrogatories were meant to assist the Adjudicator and it could not be
said that merely because the Plaintiff failed to address the case authority
cited by counsel for Defendant, there was a failure of natural justice.
(5) Concerning the allegation that the Adjudicator had not acted
independently or impartially, the Plaintiff placed no material before the
High Court to support it. Merely because an Adjudicator refused to grant
indulgence to overcome breach of stipulated timelines did not mean that
he or she had not acted impartially. It was a serious matter to suggest
lack of impartiality on the part of the Adjudicator and therefore the
Plaintiff should have adduced evidence of bias instead of referring to the
Adjudicator’s conduct in making apparent errors in her decision or her
refusal to consider counsel’s reply submission. The fact that she advanced
the decision date by two days was not a ground to allege bias either as it
was within her powers. There was no merit in this ground.
(6) There was no merit in the Plaintiff’s suggestion that the dispute should
have been referred to arbitration since the arbitration mechanism and
the adjudication mechanism addressed different issues. Arbitration is a
contractually provided dispute settlement process. It is meant to provide
for the final settlement of a dispute. On the other hand, adjudication
under CIPAA is a statutorily provided mechanism to ensure cash flow
in the construction industry. It is independent of contractual provisions
between the parties and the decision procured under the adjudication
regime is not final but is only provisional. Therefore, even if there is a
valid arbitration clause, parties can still avail the adjudication process to
obtain interim relief pending final accounts. This is clearly provided for
in s 37(a) of CIPAA which states that a party may concurrently refer the
dispute to adjudication, arbitration and to the Courts.
255
Ipoh Tower Sdn Bhd v Taki Engineering Sdn Bhd &

Another Case
ORIGINATING SUMMONS NOs: 24C (ARB)–12–03/2015 &
24C (ARB)–3–01/2015
12 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 256
By contract dated 24 November 2006, Ipoh Tower Sdn Bhd (“Ipoh Tower”)
appointed Taki Engineering Sdn Bhd (“Taki”) as its main contractor to construct
and complete the “Tower Regency Hotel and Apartments” in Ipoh (“the
contract”). The completion period was 18 months with the date of completion
stated to be 31 May 2008. In the course of the works, the Architect instructed
additional works which involved a change in drawings and specifications. Taki
made four (4) applications for extensions of time (“EOT”). EOT No 1 was dated
16 April 2008 for 76 days; EOT No 2 dated 26 August 2008 for 111 days; EOT
No 3 dated 5 November 2008 for 69 days; and EOT No 4 (overall EOT) dated 2
August 2010 for 386 days. The Architect approved and granted only EOT Nos
1 and 2 for 22 days and 26 days respectively. There was no response on the
3rd EOT. On receiving the 4th EOT, the Architect reviewed his previous grants
and revised down EOT No 2 from 26 days to 14 days thereby fixing the new
completion date at 6 July 2008. On 25 July 2008, the Architect issued a Certificate
of Non-Completion (“CNC”) and recommended the imposition of liquidated and
ascertained damages (“LAD”) from Certificate of Payment No 15 dated 1 August
2008 onwards and that such sum was to be deducted from the total sum due to
Taki. Taki claimed that it had handed over the completed works to Ipoh Tower
in January 2009. On 23 January 2009, the local authority, Majlis Bandaraya
Ipoh, issued a Temporary Certificate of Fitness and Ipoh Tower commenced
use of the building on the same day. Disputes arose between the parties in
respect of the Works which substantially related to Taki’s 24 Progress Claims
submitted in the course of the works. The Architect made deductions which
Taki claimed were unreasonable. The disputes were referred to arbitration.
Ipoh Tower’s defences were that the changes to the works were anticipated;
that the requirements of clauses 23 and 24 were not met; and that fair and
reasonable extensions of time had been granted. Ipoh Tower claimed that it had
engaged third party contractors to complete some of Taki’s uncompleted works
and thus counterclaimed for the uncompleted and defective works. The learned
Arbitrator found substantially in favour of Taki. Both the present Originating
Summonses arose from the arbitration Award. The first Originating Summons
was filed by Ipoh Tower under s 42 of the Arbitration Act 2005 (“the Act”) to
set aside parts of the Award. The second Originating Summons was filed by Taki
under s 38 of the Act to recognize the whole Award. Amongst the issues raised
256
Ipoh Tower Sdn Bhd v Taki Engineering Sdn Bhd & Another Case
was Question No 9 which was whether, on a proper and correct construction of

clause 24 of the Conditions of Contract, the undisputed fact that Taki had not
submitted any application pursuant to clause 24 of the Conditions of Contract
disallowed Taki from claiming for any direct loss and/or expense under clause
24 of the Conditions of Contract? Pursuant thereto, whether the Arbitrator
could still allow any claim for direct loss and/or expense under clause 24 of the
Conditions of Contract? The Arbitrator had awarded a sum of RM837,862.15 as
direct loss and expense under clause 24 of the Conditions of Contract despite
the clear absence of application or notice. Ipoh Tower contended that Taki
never submitted any application for a direct loss and expense claim pursuant to
clause 24 prior to the initiation of arbitration. The claim arose for the first time
in the arbitration itself. The submission of such an application was a condition
precedent to any claim under clause 24. Ipoh Tower thus contended that this
failure to comply with the notice requirements of clause 24 was "fatal" to Taki’s
claim.
Held, allowing Ipoh Tower’s application in part and setting aside and varying
the Award in part and recognising the Award as a judgment of the High Court
with costs to Taki:
(1) Questions of law can only be proper and valid questions of law if it required
the Court’s input or determination. Such questions would include errors
of law that involve incorrect interpretations of the applicable law. Section
42 requires these questions to be of substance in that they must affect the
substantive rights of the parties to the arbitration.
(2) The questions identified by Ipoh Tower were more properly raised if the
matter before the Court was in the nature of an appeal, which it obviously
was not. There were so many findings of fact involved here which the
Court had to decline to intervene. Section 8 of the Act reminds the Court
of its jurisdiction in arbitration matters. Moreover, the Courts have, on
their own volition, always adopted a policy of minimum intervention,
especially in matters relating to findings of fact given that the arbitrators
are the masters here.
(3) Save for the questions on the issue of Taki’s claim for loss and expense,
especially Question 9, there were no proper questions of law within the
meaning and intent of s 42 of the Act. There were no errors of law on these
various issues that were apparent on the face of the award. The reasoning
subscribed by the learned Arbitrator on the matter of delay, extensions of
time, LAD, and omissions were not bizarre, illogical or incomprehensible
to the extent that they were not countenanced in law. The questions
involved substantially findings of fact and were quite clearly outside the
purview of s 42. Most of these questions were actually questions of mixed
fact and law.
257
(4) The learned Arbitrator felt quite keenly about the Architect’ s conduct of
the whole administration and management of the contract works, and
this strong opinion permeated throughout the Award. Strong views were
insufficient reason or basis to interfere with any award, particularly where
those views serve as timely reminders of the standards and protocols
expected in the profession and industry.
(5) The first part of Question 9 was indeed a question of law, requiring the
determination of the Court. This question concerned the appropriate
and applicable principle in interpretation and construction of contracts,
including how notice requirements were to be understood or treated.
(6) There was no notification or application, be it in writing or even verbal. The

first time the claim came up was in the arbitration proceedings, through
Taki’s Points of Claim. In its submissions, Taki actually conceded that
there was no claim for loss and expense made at the material time when
the EOTs were made or when the applications were under consideration.
(7) It was clear from clause 24 that the right to claim and to be compensated
for direct loss and expense was subject to the requirement of a notification
or a written application. The application was vital and had to be first
made as it triggered the operation and invocation of the clause. Without
the application, there was no corresponding obligation to consider the
claim. It was not open to the Arbitrator to dispense with the notice
requirements because of how he had perceived the Architect’s execution
of his responsibilities when there were these express terms in clause 24.
Clause 24 did not permit the dispensation of notice.
(8) The Arbitrator also completely misdirected himself on the law as regards
the construction to be placed on clause 11(6) of the contract (with regards
Taki’ obligation to lodge a formal application containing its claim with
the Architect as soon as it became apparent that the particular variation
ordered by the Architect for the project caused loss) and this constituted
an error on the face of record which warranted the Court’s intervention
under s 24 of the Act.
(9) The answer to the first part of Question 9 was in the affirmative; and the
answer to the second part of Question 9 was in the negative.
258
Jan De Nul (Malaysia) Sdn Bhd & Anor v
Jan De Tridant
Nul (Malaysia) Sdn Bhd
Engineering (M)&Sdn
Anor v Vincent
Bhd vVincent Tan
Tan Chee
Ssangyong Yioun
Yioun &
Engineering
Chee &&Anor and
and Other
Construction
Anor Cases
OtherCo Ltd
Cases
Jan De Nul (Malaysia) Sdn Bhd & Anor v

Vincent Tan Chee Yioun & Anor and Other Cases
ORIGINATING SUMMONS NOs: 24C (ARB)–32–10/2015, 24C (ARB) –
34 –10/2015 & 24C (ARB)–45–12/2015
LEE SWEE SENG J
30 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 259
Central Malaysian Properties Sdn Bhd (“CMP”) — a company controlled by

Vincent Tan (“VT”) — was the developer or Employer of a land reclamation cum
construction project (‘the Project’). It appointed Jan De Nul (Malaysia) Sdn Bhd
(“JDN”) as its contractor pursuant to the CIDB Standard Form of Contract For
Building Works, 2000 Edition. JDN was controlled or managed by Sofidra — its
parent corporation based in Luxembourg. The Project was affected by disputes
over payment and reclamation failures, eventually leading to JDN’s termination
of the contract. JDN and Sofidra commenced arbitration proceedings resulting
in an award that was challenged by all the parties. VT and CMP applied to
refer questions of law to the High Court whereas JDN and Sofidra applied to
refer questions of law and to set aside the arbitral award. Several issues arose
for the High Court’s determination. This digest concerns two (2) preliminary
issues before the High Court. The two (2) preliminary issues were in relation
to: (i) whether the arbitration between the parties was an international or
domestic arbitration since reference of questions to law in an award under
s 42 of the Arbitration Act 2005 (‘the Act’) are confined to domestic arbitrations;
and (ii) whether JDN’s s 42 Application complied with O 69 r 4 of the Rules of
Court 2012. JDN contended that the instant arbitration was an international
arbitration since Sofidra was a company incorporated in Luxembourg with a
registered address and place of business outside Malaysia, thereby fulfilling the
requirements of an international arbitration, as per s 2 of the Act.
Held, dismissing the Plaintiff’s application with costs
(1) Sofidra was merely a nominal party with no cause of action and it had
no discrete issue, either raised by or against it, in the arbitration. In
the instant case, the dispute was essentially one between JDN and CMP.
Sofidra in a very real sense did not participate in the dispute other than
being joined in passively as a party for ease of enforcing the guarantee
in the event of an award in favour of CMP. The disputes were clearly and
critically between JDN and CMP as could be seen in the pleadings and
in the issues framed for determination. There was nothing pleaded on
Sofidra other than the corporate Parent Guarantee that it had signed.
259
(2) The court would dismiss the preliminary objection as for intents and
purposes the arbitration agreement or more importantly, the submission
to arbitration was between JDN on the one hand and VT and CMP on the
other.
(3) Although the questions of law were annexed in JDN’s Originating

Summons ("OS"), they were not in the strict and prescribed form as
required for the purpose of clarity of expression and ease of reference so
that any challenge was readily captured with the reasons therefore clearly
spelt out and the impugned paragraphs of the Award specifically singled
out. Although the nature of the alleged non-compliance amounted to a
technical non-compliance, it was not fatal to the OS and/or was curable
pursuant to O 1A or O 2 r 1 of the Rules of Court 2012 which captures the
spirit of being slow to strike down a non-compliance that was curable
and correctable without causing any prejudice to the party raising the
objection.
(4) As CMP had failed to establish that the alleged non-compliance had
occasioned a substantial miscarriage of justice to CMP and/or caused
prejudice that may not be compensated by cost, the High Court would
exercise its discretion to allow JDN to file an Amended OS setting out in
the prescribed form and format the specific questions of law raised, the
grounds in support of it and the specific paragraphs of the impugned
Award.
260
Kerajaan Malaysia (Kementerian Sumber Asli dan Alam Sekitar) v
Kerajaan Malaysia (Kementerian Sumber Asli dan Sakata
Kumpulan Alam Sekitar)
Sdn Bhdv
Kerajaan Malaysia (Kementerian Sumber Asli dan

Alam Sekitar) v Kumpulan Sakata Sdn Bhd
ORIGINATING SUMMONS NO: 24C(ARB)–44–12/2015
LEE SWEE SENG J
9 MAY 2016
_________________________
[2017] 1 CIDB-CLR 261
The Plaintiff applied under s 42 of the Arbitration Act (“the Act”) for
determination of certain questions of law arising out of an Arbitrator’s final
award, which award was the outcome from a reference to arbitration by the
parties of disputes arising out of a contract dated 16 February 2007. For the
purpose of this appeal, only one question of law was deemed relevant by the
High Court, i.e., whether the Arbitrator had jurisdiction in law to allow interest
on the amount awarded, which was from date of commencement of the
arbitration and clarified as ‘pre-award interest’. The Defendant contended that
the question of law posed did not substantially affect the rights of the parties
(as required under s 42 of the Act) as the rights of the parties in respect of other
parts of the final award were not affected. Thus it was argued that an answer to
the question would not substantially affect the rights of the parties.
Held, allowing the Plaintiff’s application and varying the award by setting aside
the pre-award interest only, such that interest should run from date of award to
date of realization:
(1) The interest granted by the Arbitrator in favour of the Defendant was
clearly a question that substantially affected the right of the parties not
just in terms of quantum, but also with respect to the very jurisdiction
of the Arbitrator in awarding interests, whether it be pre-award or post-
award interest or both.
(2) The position of the law on pre-award interest is as declared by the Court
of Appeal in Far East Holdings Bhd & Anor v Majlis Ugama Islam dan
Adat Resam Melayu Pahang & Another Appeal [2015] 8 CLJ 58 at p 89;
[2015] 4 MLJ 766 at p 798. An Arbitrator has no jurisdiction to award
pre-award interest but only post-award interest if provided for in the
arbitration agreement. The doctrine of stare decisis or binding precedent
applies to the High Court. Both judicial deference and discipline would
demand of a High Court to follow the decision of a Court of Appeal on
a point of law already stated. Whilst one may be at liberty to state the
persuasive arguments to the contrary, one is not at liberty to disregard an
authoritative pronouncement of the law of a court higher up in hierarchy.
261
Kerajaan Malaysia v Tasja Sdn Bhd

ORIGINATING SUMMONS NO: WA–24C(ARB)–2–01/2016
LEE SWEE SENG J
30 MAY 2016
_________________________
[2017] 1 CIDB-CLR 262
The Plaintiff appointed the Defendant pursuant to a written contract dated 1

August 2001 to construct and complete a naval complex construction project
(“the project”) for a total contract sum of RM49,990,000 (“the contract”).
A Certificate of Practical Completion dated 14 October 2004 was issued by
the Plaintiff which certified that the whole of the works “were satisfactorily
completed on 14 September 2004”. Subsequently, a dispute arose between the
parties concerning the Defendant’s claim against the Plaintiff for payment of
work done relating to the subsequent topping up of surcharge carried out during
the agreed surcharged period and removal upon completion. The dispute was
referred to arbitration and the Arbitrator found in favour of the Defendant. The
Plaintiff was ordered to, inter alia, pay the Defendant pre-award interests on the
principal sums awarded. Consequently, the Plaintiff filed this application under
s 42 of the Arbitration Act 2005 (“the Act”) to refer the following question of
law concerning the final arbitral award, i.e., whether the Arbitrator erred in law
in deciding that an Arbitrator had jurisdiction in granting ‘pre-award interest’?.
Held, setting aside the award in part:
(1) Section 33(6) of the Act had made specific provision for post award
interest, but did not provide for pre-award interest. Clearly the Act did not
contemplate the awarding of pre award interest. When the Act specifically
provided for post award interest but was silent on pre-award interest,
then implicitly the Legislature did not intend to confer on an Arbitrator
the power to award pre-award interest.
(2) Both judicial decorum and discipline would require this Court to follow
the ratio (i.e. ‘the reason’ or ‘rationale for the decision’) laid down by a
higher court as in the Court of Appeal in Far East Holdings Bhd & Anor
v Majlis Ugama Islam Dan Adat Resam Melayu Pahang & Another Appeal
[2015] 8 CLJ 58 (“Far East’s case”).
(3) The Court of Appeal in Far East’s case had decided that an Arbitrator
lacked the power and so the jurisdiction to grant pre-award interests.
It was a pronouncement of the law that went to the very root and core
of the Arbitrator’s powers. In as much as the Court of Appeal affirmed
the decision of the High Court to intervene and set aside the pre-award
262
Kerajaan Malaysia v Tasja Sdn Bhd
interest in that case, this High Court in the instant case would so allow it
here.
(4) In the instant case, the Plaintiff merely made a bare denial on the
Defendant’s claim for pre-award interests. It was well established that
the danger of this kind of general denial defence is that once the Plaintiff
took that course, it must stand or fall on its pleaded defence. It was not
permissible for the Plaintiff to proceed to put forward some affirmative
case which they had not pleaded or alleged.
263
Kesuma Murni Sdn Bhd v

Perbadanan Kemajuan Negeri Selangor
SUIT NO: 22NCVC–195–02/2013
SEE MEE CHUN J
29 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 264
The Plaintiff was appointed by the Defendant to carry out a building project.
A performance bond (“the bond”) was required. The Plaintiff was issued with
several notices and warnings for delay and failure to comply with the terms
of contract. Subsequently, the Defendant issued a notice of termination and
terminated the contract. The Plaintiff claimed for a declaration that the
termination was unlawful and for damages therefrom. The Defendant resisted
the claim and counterclaimed for costs of completion, payment of abortive fees,
costs of rectification, costs of rental and costs of maintaining a project team.
The Plaintiff had obtained from the Defendant a judgment on admission. The
main issue before the High Court was whether the termination of the contract
was lawful or otherwise.
Held, dismissing the Plaintiff’s claim but allowing the Defendant’s counterclaim,
with costs to the Defendant:
(1) From the evidence adduced, there had been delay and non-compliance of
terms of contract. This was clearly documented in letters that had never
been denied by Plaintiff. There was also no evidence that the Plaintiff
had been proceeding regularly and diligently when the progress at site
was 9.84% when it ought to have been 36.22% as at the date of notice of
intention to terminate.
(2) In the instant case, the delay by the Plaintiff entitled the Defendant
to terminate. The notice of intention to terminate and the notice of
termination were not defective as the Plaintiff was aware of the defaults
in question. The delay was solely that of the Plaintiff. The Defendant
had not breached the contract. On termination, the Defendant could
call on the bond pursuant to clause 51.1(ii)(C) of the contract. The fact
that termination was done 6 months before the completion date did
not without more render the termination unlawful. The Plaintiff’s claim
should thus be dismissed.
(3) The Defendant had the burden of proving its losses with regard to its
counterclaim and the Defendant had in fact proved its losses on costs of
completion. However, there was no proof on how the costs of rectification
was arrived at.
264
Klass Corporation (M) Sdn Bhd v MKRS Management Sdn Bhd
Klass Corporation (M) Sdn Bhd v

MKRS Management Sdn Bhd
CIVIL APPEAL NO: 12AC–17–12/2015
LEE SWEE SENG J
29 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 265
The Plaintiff/Respondent sued the Defendant/Appellant for the balance sum

of RM 715,381.79, being charges due and owing to it for the supply of labour,
construction and letting of erected tabular scaffolding to the Defendant. The
basis of the Plaintiff’s claim arose from the terms and conditions set out in a
quotation dated 10 June 2014, duly accepted by the Defendant vide its purchase
order ("PO”) dated 11 June 2014. Upon completion of the work, the Plaintiff
issued its invoices which were supported by contemporaneous documentation
showing the work was done at the Defendant’s request and approved by the
Defendant. The defence filed was, inter alia, that the billing had not captured
the correct quantity and measurement of scaffolding supplied and that the
calculation of the charges was not in accordance with the purchase order.
At least six (6) case management dates were fixed for the parties to comply
with the directions of the Sessions Court Judge (“SCJ”) for trial. During trial,
subsequent to the Plaintiff’s first witness completing his evidence-in-chief,
the Defendant served on the Plaintiff an application to amend its defence. The
amendments sought to introduce the element of "set-off" as well as to plead
that the billing had not been in accordance with ‘the construction industry
practice generally and the supply of tabular scaffolding specifically’. The trial
was adjourned and the Defendant’s application heard and dismissed by the SCJ.
This was the Defendant’s appeal against that dismissal. The High Court took
into account the following considerations in arriving at its decision: (i) whether
the Defendant’s application to amend its defence after trial had proceeded was
bona fide and that the delay was reasonable; (ii) whether the late application
to amend by the Defendant would prejudice the Plaintiff and (iii) whether the
proposed amendment changes the character of the defence.
Held, dismissing the appeal with costs
(1) Order 20 r 5 of the Rules of Court 2012 provides that the Court may at any
stage of the proceedings allow any party to amend his pleadings on such
terms as to costs or otherwise as may be just and in such a manner, if any,
as it may direct. Whilst an application to amend may be made at any stage
of the proceedings, the discretion lies with the Court taking into account a
host of factors in deciding whether the amendments should be allowed.
265
(2) Any amendment application has to be made at the earliest opportunity. In

the instant case, it was not and more than that, it was made at the eleventh
hour on the first day of trial after the Plaintiff’s first witness had given his
evidence. Whilst the law did not punish a mere innocuous inadvertence,
it was not sympathetic to a shoddy preparation that stumbled across a
defence or particulars of it, previously unknown to the Defendant itself as
declared in the instant case.
(3) The timeline that leads finally to a trial taking off is a reasonably good test
as to whether a party had been guilty of deliberate or deleterious delay. In
the instant case, almost seven months had lapsed before trial commenced
and when the Plaintiff’s Statement of Claim was served on the Defendant.
In between, there were numerous case management dates. There had also
been further case management dates since the filing of the defence. The
amendment was made on the first day of trial after trial had commenced.
The Defendant had failed to give a reasonable explanation for the delay
in making this amendment application. It was woefully inadequate and
wanting for the Defendant to explain that it only came across the defence
of billing not according to industry practice when the so-called discovery
was made that the Plaintiff had billed according to volume in meter cube.
(4) The Defendant averred in it’s affidavit in support of the amendment

application that it had discovered this information (i.e, the Plaintiff’s
billing for the scaffolding installed was based on cubic meter which was
not in accordance, so it claimed, with industry practice in Malaysia and
that the charges were excessive) a few days before the commencement of
the trial. However, the quotation from the Plaintiff to the Defendant dated
10 June 2014 clearly showed the quotation in cubic meter. Likewise, the
Defendant’s PO dated 11 June 2014 to the Plaintiff also referred to the
measurement of the scaffolding in terms of cubic meter. Furthermore,
the Plaintiff’s invoices that had been in the Defendant’s possession also
showed cubic meter and some payments had already been made based on
that.
(5) The last case management was in July and the trial was initially fixed
for October before being postponed to November. For the Defendant to
wait almost five (5) months and then to say that they had stumbled upon
an important discovery of something amiss in the method of billing is
stretching credibility to its limits. The late application with no reasonable
explanation smacks of a lack of bona fides in making the application.
(6) The late proposed amendments that made reference to what was industry
practice would entail the calling of expert witness to testify. The need to
call such witness should have been disclosed to the SCJ at the stage of case
management for there specific direction would be given under the Rules
of Court 2012 where expert evidence was envisaged, all with a view to
securing the just, expeditious and economical disposal of the proceedings.
266
Klass Corporation (M) Sdn Bhd v MKRS Management Sdn Bhd
(7) In the instant case, the Court had been deprived of the opportunity to make
specific directions with respect to expert evidence and the delay caused
could only prejudice the Plaintiff for it would set the trial back a few more
months as the Plaintiff would have to get their expert witness, an expert
report would have to be prepared and the Plaintiff’s first witness, who had
already given evidence-in-chief, would have to be recalled as his witness
statement would in all probability have to be revamped. The Defendant’s
late application for amendment which, if allowed, would cause the trial
to be further delayed, was a prejudice to the Plaintiff which could not be
compensated by costs.
(8) The Defendant’s proposal to amend its defence, though couched as a

defence of set-off, was in essence a camouflage for a counterclaim. The
so-called "set-off" was more of a tactical manoeuvre to disguise what was
in reality a ‘counterclaim’ so as to avoid the obvious pitfall of making an
application for amendment to add a counterclaim after trial had proceeded.
It was tantamount to shifting the goal post after trial had started and
the ‘match’ as it were, had begun. There was considerable force in the
Plaintiff’s argument that it was improbable that the Defendant, being
involved in a multimillion dollar project and employing professionals,
would not know of this ‘industry standard or practice’ issue at the outset
of the suit.
(9) The SCJ had exercised her discretion correctly and had dismissed the
Defendant’s late application for amendment of its defence based on
settled and sound principles governing applications for amendments.
267
Klassik Tropika Development Sdn Bhd v

Lembaga Rayuan Negeri Pulau Pinang & Ors
HIGH COURT, PENANG
JUDICIAL REVIEW NO: 25–64–09/2015
LIM CHONG FONG J
22 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 268
This was a judicial review application brought by the Applicant ("a developer")
for an order of certiorari to quash the decision of the First Respondent (Appeal
Board of the State of Penang constituted pursuant to s 36 of the Town and
Country Planning Act 1976 (“TCPA”)) dated 26 June 2015 (“the Decision”)
granting an interim stay of the implementation of the planning permission
(“the Planning Permission”) given by the Second Respondent (Majlis Bandaraya
Pulau Pinang). The Applicant was the developer of the proposed Icon Residence
project (“the Project”) on a piece of land (“the Land”). The Third to Seventh
Respondents were individuals residing within the vicinity of the Project. Prior
to August 2010, there was an existing double storey bungalow that stood on
the Land (“the Bungalow”). The Applicant had caused the demolition of the
Bungalow without the prior approval of its application for planning permission.
The demolition of the Bungalow building was an offence under the TCPA and the
Applicant was prosecuted in the Georgetown Magistrate Court. The Applicant
pleaded guilty and was convicted and imposed a fine of RM6,000,00. The Second
Respondent then issued an enforcement notice to the Applicant pursuant to the
TCPA to restore the demolished Bungalow (“the Re-build Order”). Subsequently,
the Applicant submitted an application for planning permission to the Second
Respondent which was approved with conditions. The Third Respondent filed
a notice of appeal to the First Respondent against the Second Respondent’s
decision granting the Planning Permission to the Applicant (“the Appeal”).
The Third Respondent thereafter filed an application to the First Respondent
pursuant to r 17 of the Appeal Board Rules 1989 (“ABR”) to seek the following
reliefs: (1) that the approval and effect of the planning permission be stayed
pending the final disposal of the appeals before the First Respondent; and
(2) that a Notice of Cessation of Works be issued to the developer. The First
Respondent thereafter ordered the implementation and execution of the
planning approval granted to the Applicant be stayed until final disposal of the
appeal before the Board. The Applicant sought judicial review of the Decision.
The issues arising for determination were: (a) whether the First Respondent
had the jurisdiction and/or power to make the Decision; and (b) if so, whether
the First Respondent properly made the Decision. The Applicant contended that
the First Respondent took into account irrelevant considerations as follow: (i)
inadequacy of the fine imposed upon the Applicant by the Court for unlawfully
demolishing the Bungalow; (ii) non compliance of the Re-Build order on the
268
Klassik
Lembaga Tropika
Rayuan Development
Negeri Sdn Bhd
Pulau Pinang & Orsv
part of the Applicant; (iii) third party rights affected if the Planning Permission
was not stayed; and (iv) failure to require the undertaking to damages to be
provided by the Third to Seventh Respondents. The Third Respondent raised
two preliminary objections as follows: (a) that two persons in the name of Teoh
Moi Kiah and Lim Wah Lay respectively were relevant persons but not named
as parties in this judicial review application although they were also appellants
in the Appeal and that this non-joinder in this application was fatal. The Third
Respondent contended that this application is an exercise in futility because
the Decision would not in effect be fully quashed even if this application was
allowed; and (b) that the Applicant’s Statement under Order 53 was stated as
pursuant to the Rules of the High Court 1980 (“RHC”) instead of the Rules of
Court 2012 (“ROC”), which was said to be a fatal irregularity.
Held, dismissing the application with costs:
(1) It was unnecessary to enjoin Teoh Moi Kiah and Lim Wah Lay since they
were not involved in the application for the stay of the implementation of
the Planning Permission. In any event, both of them could have intervened
in this Application if they thought their rights had been affected but they
did not.
(2) The reference to the RHC was merely an inadvertent mistake that
resulted in a technical non-compliance. This was excusable pursuant to
Order 1A of the ROC. There was no difference in substance with regard
to the provision on the statement, whether under the RHC or ROC. The
Third Respondent did not demonstrate any prejudice suffered as the
result thereof.
(3) The jurisdiction of the First Respondent is plainly conferred by statute. It

is strictly circumscribed by the statute that could neither be expanded nor
acquiesced by the disputants.
(4) The issue on jurisdiction and/or power of the First Respondent was
a question of law. The lack of jurisdiction and/or power is a specie of
illegality that warrants judicial review intervention.
(5) The Decision which was an interim stay of implementation of the Planning
Permission was made in the exercise of a procedural right. This is because
it was interlocutory in nature and meant to only temporarily preserve
the status quo pending the conclusion of the substantive right of appeal
against the Planning Permission before the Appeal Board under the TCPA.
In other words, it was made in the course of a legal process to determine
a substantive right. Consequently and being a procedural right, the power
to make the Decision could therefore either be conferred in the parent act
or the rules made thereunder if there was a provision in the parent act for
the making of procedural rules. In this case, the power could be derived
from s 36(10) of the TCPA or r 7 of the ABR made pursuant to s 36(15) of
the TCPA.
269
(6) Since the nature of the Decision was an interim stay of implementation
of the Planning Permission, this necessarily involved the exercise of
discretion on the part of the First Respondent which would rarely be
interfered with even in an appeal.
(7) The First Respondent had meticulously undertaken the balancing exercise
of the competing interest of the Applicant and the Third to Seventh
Respondents put forth by them as well as third party interest. The special
circumstances test enunciated by the Federal Court in the case of Kosma
Palm Oil Mill Sdn Bhd v Koperasi Serbausaha Makmur Bhd [2004] 1 MLJ
257 had been applied in making the Decision. The First Respondent had
in the exercise of its discretion considered the matters required to be
considered by it.
(8) On the issue of inadequacy of fine imposed upon the Applicant for
unlawfully demolishing the Bungalow, the First Respondent as a matter
of fact did not take into consideration the inadequacy of the fine that had
been imposed by the Court upon the Applicant. The Applicant’s contention
was thus misconceived.
(9) On the issue of non compliance of the Re-build Order, this was as a matter
of fact not considered in isolation but in the context of the Appeal vis a vis
the Planning Permission. This was a relevant consideration because of the
peculiar facts of the Appeal. At the hearing of this Application, the Second
Respondent had taken the position that the Re-build Order was deem
superseded by the grant of the Planning Permission. Since this position
was not made known to the First Respondent at the material time, it was
justified on the part of the First Respondent to take into consideration the
non compliance of the Re-build Order.
(10) On the alleged irrelevant consideration of taking into account third party
rights, it was a relevant consideration the First Respondent took into
account.
(11) In respect of non requirement of the undertaking to damages to be

provided by the Third to Seventh Respondents, the First Respondent
found as a matter of law that there was no necessity to require such an
undertaking in a stay application. In addition, there was a plethora of case
authorities that suggested the giving of the undertaking was discretionary
in analogous Court injunction cases. The undertaking to damages could
be dispensed in a fair and just circumstance.
(12) The provision of the security is merely collateral. Put simply, the
denial of security had no direct bearing on the validity of the Decision.
The Applicant’s reliance on this as an irrelevant consideration was
misconceived.
270
Klassik
Lembaga Tropika
Rayuan Development
Negeri Sdn Bhd
Pulau Pinang & Orsv
(13) The First Respondent did not take into account irrelevant considerations
in making the Decision, contrary to that as alleged by the Applicant.
271
Komala Devi M Perumal v

Bandar Eco-Setia Sdn Bhd & Anor
CIVIL SUIT NO: 22(NCVC)–279–06/2014
LIM CHONG FONG JC
15 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 272
This was a suit brought by the purchaser of a bungalow house (“the Building”)
in an exclusive gated community against the developer. The First and Second
Defendants were the developer and land owner respectively of the bungalow
house purchased by the Plaintiff. The complaint of the Plaintiff that led to this
suit was basically the Building was fraught with major defects. Vacant possession
of the Building was officially given by the First Defendant to the Plaintiff on
16 September 2009. There were subsequently 2 further inspections held on 8
October 2009 and 8 July 2010. By a letter dated 26 August 2010, the Plaintiff
wrote to the First Defendant and listed her alleged outstanding defects in the
Building and required the First Defendant to submit its proposed rectification
plan within 2 weeks to the Plaintiff for approval. The First Defendant responded
by letter dated 9 September 2010 primarily stating that the First Defendant
was in the midst of obtaining the response from their consultants. In addition,
the First Defendant stated that it was not the practice of the First Defendant to
obtain the approval of the homeowners or their consulting engineer prior to
the commencement of defect rectification works. The First Defendant replied
to the Plaintiff by letter that the First Defendant was willing to rectify certain
works but certainly not those that involved upgrading. Subsequently, there
were numerous exchanges of letters between the parties. Finally by letter
dated 29 August 2011, the Plaintiff notified the First Defendant that by reason
of the First Defendant’s failure to rectify the defective works, the Plaintiff would
employ third parties to do so and recover the costs incurred from the First
Defendant. The First Defendant responded denying the Plaintiff’s allegations
and reiterated that the First Defendant was willing to carry out the rectification
works deemed fit, appropriate and as recommended by its consultants. By
reason of the continuing impasse between the parties, the Plaintiff brought this
suit. The First Defendant contended that many of the alleged claims were not
sustainable based on the causes of action as pleaded. The following issues arose
for the determination by the Court: (i) Scope and sufficiency of the Plaintiff’s
pleadings in respect of the items claimed; (ii) Liability of the First Defendant
in respect of each of the items claimed; and (iii) Fair amount of compensation
in respect of each of the items claimed wherein the First Defendant was liable.
There was also the allegation of lack of independence on the part of SP3 and
SP4, the expert witnesses of the Plaintiff in that they were both university
contemporaries of the Plaintiff and her husband during their student days at
272
Komala Devi M Perumal v Bandar Eco-Setia Sdn Bhd & Anor
the University of Malaya. As for SD3 and SD4 who were the expert witnesses
of the First Defendant, they were the Consulting Engineer and Architect of the
Project.
Held, allowing the Plaintiff’s claims with costs:
(1) The Courts should give their decision in strict compliance with the
pleadings. The Plaintiff only pleaded and relied on breach of the express
terms, to wit: clauses 14 and 21 of the Sale and Purchase Agreement
(SPA) as confirmed during the clarification with counsel. The former
clause was a narrow one that provided for materials and workmanship to
conform to description set out in the Fourth Schedule and plans approved
by the Appropriate Authority as in the Second Schedule of the SPA. The
latter clause dealt with conformance to the provisions and requirements
of any written law in relation to the Building. The pertinent difference
was that the threefold implied warranty was much wider than that
expressly provided in clause 14 of the SPA because the implied warranty
also protected the purchaser from obtaining a building that was not
reasonably fit for human habitation or occupation. This implied warranty
came into play particularly when there was alleged design inadequacy in
the Building. The Plaintiff was not entitled to rely on the threefold implied
warranty because it was not pleaded as such. The implied terms of the
contract are material facts that must be pleaded.
(2) The Plaintiff sought to rely on the threefold warranty implied term that
was not pleaded in lieu of or in addition to that of the breach of clauses 14
and 21 of the SPA that were expressly pleaded in paragraphs 19, 39 and
40 of her Statement of Claim only.
(3) The reception of expert evidence is governed by ss 45 and 51 of the

Evidence Act 1950 in that the evidence is only admissible to furnish
the court with scientific information which is likely to be outside the
experience and knowledge of the judge. In this regard, the expert witness
must have the requisite qualification and skill and that his opinion must
be supported with grounds.
(4) The expert witnesses were not independent only in the sense that they
were not previously unknown to the parties and introduced to them for
the first time to give their opinion. All four expert witnesses possessed
the necessary qualification and experience. They had also provided their
opinion vide written report supported with grounds. Thus their evidence
was admissible. The lack of independence, if any, as alleged by the parties
could nonetheless be addressed in the weight to be attached to their
testimony as ascertained from their demeanour and cogency of their
grounds and responses in Court.
273
(5) There was the need to mitigate the damages incurred. The Plaintiff was
thus obliged to show that she had acted reasonably in the appointment
of the rectification contractors such as by calling tenders or alternative
quotations, otherwise to satisfactorily explain why such steps were not
carried out.
(6) The amount of fair compensation payable by the First Defendant to

the Plaintiff was in law further subject to the appropriate measure of
damage as well as prevention of the First Defendant by the Plaintiff from
undertaking rectification work.
(7) Based on the SPA, the First Defendant not only had the duty but also the
right to rectify the defects acknowledged by the First Defendant within
30 days upon receiving the notification from the Plaintiff. Consequently,
if the Plaintiff failed to afford to the First Defendant the right to do so, the
consequence would be that as held in Pearce & High Ltd v Baxter [1999]
1 BLR 101 (i.e. the amount of damages that the Plaintiff was entitled to
recover would be limited).
274
Lifomax Woodbuild v Cheah Joi Yong & Another Case
Lifomax Woodbuild v Cheah Joi Yong &

Another Case
SUIT NO: 22C–13–06/2014 & 22(NCVC)–285–06/2014
SEE MEE CHUN J
29 APRIL 2016
_________________________
[2017] 1 CIDB-CLR 275
The Plaintiff had filed separate suits against one Cheah Joi Yong ("Cheah")
("Suit 13") and against one Ng Yee Teck ("Ng") (Suit 285). Both suits were
subsequently consolidated. Earlier the Plaintiff had filed another suit against
Mammoth Empire Construction Sdn Bhd ("Mammoth"), i.e. the “2012 Suit”,
claiming a sum of RM1,447.087.65 for construction materials delivered by the
Plaintiff to Mammoth. The Plaintiff’s claim in the 2012 Suit was initially allowed
by the High Court but the Court of Appeal subsequently allowed Mammoth’s
appeal and set aside the judgment against Mammoth. Suit 13 and Suit 285 were
each to claim a sum of RM1,447,087.65, by virtue of Cheah and Ng being the
guarantors of Mammoth. Both Cheah and Ng filed the present applications to
set aside Suit 13 and Suit 285 respectively. Both applications were premised on
the ground that the liability of Cheah and Ng as guarantors to Mammoth were
secondary to the liability of Mammoth which was the principal debtor and as
Mammoth had been held not liable to the Plaintiff, it followed that the Plaintiff
had no cause of action against both Cheah and Ng. The Plaintiff on the other
hand claimed that Cheah and Ng were principal debtors and not mere sureties.
Held, allowing both the applications to strike out the Plaintiff’s claim:
(1) The Plaintiff’s claim against Cheah and Ng were premised on them being
guarantors to Mammoth. The essence of a guarantee has to be that there
is an outstanding sum due or owing by the customer. In this case there
was no outstanding sum due by virtue of Plaintiff’s claim in the 2012 Suit
being dismissed. Hence even if Cheah and Ng were principle debtors, the
element of outstanding sum was not present.
(2) Both Cheah and Ng’s liability as guarantors of Mammoth were secondary
to the liability of Mammoth which was the principle debtor. As the heading
to the guarantee went, this was a joint and several guarantee and despite
the mention of principal debtor it had to be read as a whole. The principal
debtor was Mammoth in respect of whose default the guarantee had been
given.
275
(3) The Plaintiff had no valid/reasonable cause of action against Cheah and
Ng as the guarantors of Mammoth when Mammoth (the principal debtor)
was not liable to the Plaintiff. As such, both claims in Suit 13 and Suit 285
were obviously unsustainable and bound to fail and should be struck out.
276
Mayland Development Sdn Bhd & Anor v Tanjung Teras Sdn Bhd
Mayland Development Sdn Bhd & Anor v

Tanjung Teras Sdn Bhd
CIVIL APPEAL NO: WA–12BC–2–03/2016
LEE SWEE SENG J
28 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 277
The Plaintiff (“Tanjung Teras”) in the Sessions Court was the subcontractor
appointed by the Main Contractor Vistanet (M) Sdn Bhd (“Vistanet”) for the
balance of the works with respect to a construction project. The Developer/
Landowner was Mayland Boulevard Sdn Bhd (“Mayland Boulevard”). The
Directors and Shareholders of Vistanet were different from those of Mayland
Boulevard. The Defendants in the Sessions Court were Mayland Development
Sdn Bhd (“D1”) and Malaysia Land Properties Sdn Bhd (“D2”). D1 was a
subsidiary of D2. The Defendants and Mayland Boulevard were companies,
loosely regarded as part of the conglomerate of Mayland Group of Companies.
The Project was completed and the Plaintiff sued Vistanet for the balance
payment of RM435,685.95 which was not paid. The Plaintiff obtained summary
judgment against Vistanet and served a s 218 Notice under the Companies Act
1965 (“the Act”) on Vistanet. Before a winding-up petition could be presented,
Vistanet served a Notice of Creditors’ Meeting under s 260(1) of the Act calling
for a meeting of creditors to approve a creditors’ voluntary winding-up of
Vistanet. The Plaintiff attended the creditors meeting and voted in favour of the
winding-up of Vistanet. D1 and D2 had both filed Proof of Debt against Vistanet
to the tune of RM35,321,322.00. The Plaintiff claimed that based on the size
of the debt purportedly owed by Vistanet to the Defendants, the Defendants
had acted fraudulently to deprive the Plaintiff of any payment from Vistanet.
The Plaintiff thus commenced an action against the Defendants to recover the
judgment they had obtained against Vistanet. The Plaintiff contended that the
Defendants together with Mayland Boulevard and Vistanet operated as a single
group enterprise or a single economic unit and that the corporate veil must be
lifted to show that Vistanet had been fraudulently used by the Defendants in
the Mayland Group of Companies to avoid its contractual obligations to pay. The
Sessions Court Judge lifted the corporate veil and gave the Plaintiff judgment
against both the Defendants based on the judgment sum that the Plaintiff
had earlier obtained against Vistanet. The Defendants appealed against this
decision. The issues arising for determination were: (i) Whether the principle
of res judicata applied to prevent the Plaintiff from suing the Defendants for
the same debt after it had obtained summary judgment against Vistanet in a
separate suit; (ii) Whether the separate personalities of companies had been
used by the Defendants to help Vistanet fraudulently evade its liability to pay
the Plaintiff; and (iii) Whether the corporate veil of Vistanet ought to be lifted to
make the Defendants liable to the Plaintiff for the debt of Vistanet.
277
(1) The fact that the Defendants were different in this suit compared to a
previous High Court suit where summary judgment had been obtained
by the Plaintiff against Vistanet, did not necessarily mean that res judicata
would not apply. Different parties in the previous High Court suit and the
present High Court suit would not necessarily displace the bar pursuant
to the doctrine of res judicata. The doctrine extends not only to the
parties in the action but also to their privies, namely persons who share a
common interest in the subject matter of the litigation in question. Here
the Defendants had privy of interests in that they were said to share a
common interest in the subject matter of the litigation namely the debt
owing by Vistanet to the Plaintiff.
(2) Estoppel by election would operate in that the Plaintiff had elected to
commence action against Vistanet which culminated in a summary
judgment. The Plaintiff then proceeded to lodge its Proof of Debt and
voted in favour of the winding up of Vistanet. There had been an election
by conduct on the part of the Plaintiff. Hence, the Plaintiff could not now
be allowed to take the benefit under the summary judgment and use it
against the Defendants here.
(3) The fact that a company cannot pay its creditors at the end of the day,
does not mean that fraud has been perpetrated. What the creditor like the
Plaintiff here needs to show is that what Vistanet had received for work
done, it had not paid its subcontractors like the Plaintiff but instead it had
paid others or even its own directors or related and associate companies
for dubious services rendered in a scheme to defraud creditors. Here the
Plaintiff had not produced an iota of evidence in that direction.
(4) Sharing of premises and even human resources and management and
administrative resources are not uncommon for companies within the
Group. These factors taken together cannot make the other members of
the Group liable for the debt of a company in the Group that failed. It is
only when these companies in a Group so-called are used as a vehicle to
perpetrate fraud that the law will allow the veil of incorporation to be
lifted and make the parties responsible liable for payment. Short of that,
the debt of that company, in this case Vistanet, remained that of Vistanet
alone.
(5) Only parties to a contract may sue each other. Not only was there no
privity of contract, there was the hurdle of separate legal entities such
that even, as here, both Vistanet and Mayland Boulevard had gone into
liquidation, there was nothing that the Defendants could do, except to let
the loss lies where it fell.
278
Mayland Development Sdn Bhd & Anor v Tanjung Teras Sdn Bhd
(6) The fact in issue was whether the Defendants had fraudulently caused
Vistanet to be wound up to frustrate the summary judgment obtained by
the Plaintiff against Vistanet. The most appropriate way to resolve the fact
in issue was by way of an application pursuant to s 274 of the Act, and not
by filing the present action.
(7) The fact that a contractor is a wholly owned subsidiary of the developer/
employer where it has complete control over the subsidiary does not
make it liable for the debts of its wholly owned subsidiary.
(8) An appellate court should not interfere with findings of facts of a trial
Judge. However, appellate intervention is permitted to correct wrong
conclusions arrived at or wrong inferences made from the findings of
facts of the trial Judge.
(9) The Plaintiff had not proved fraud on the part of the Defendants to justify
the lifting of the corporate veil and to make the Defendants liable for
the debt of Vistanet. Neither had the Plaintiff proved that the corporate
structure of the Defendants had been used as a means to help Vistanet
evade its contractual liability.
279
Merger Insight (M) Sdn Bhd v Fairview Schools Bhd

SEE MEE CHUN J
19 MAY 2016
_________________________
[2017] 1 CIDB-CLR 280
The Plaintiff entered into a contract with the Defendant by letter of award dated
27 April 2009 for the construction of a school. The Plaintiff claimed against
the Defendant inter alia for its final claim under the contract amounting to
RM1,834,457.71 and to open up, review and revise the Certificates of Extension
of Time (“EOT”). The Defendant resisted the claim and counterclaimed for
RM805,000.00 consisting of liquidated and ascertained damages (“LAD”)
of RM419,000.00 and refund of payment of summons issued by the Dewan
Bandaraya Kuala Lumpur (“DBKL”) of RM315,000.00, general and exemplary
damages. With regard to the Plaintiff’s claim based on its final claim, it was
the evidence that all consultants for the project had signed the statement of
final account. However, the Defendant had not signed it. It was the Plaintiff’s
evidence that the Defendant was not contractually required to sign the
statement but that it was required as a matter of procedure. Concerning the
Defendant’s counterclaim for the refund of payment made towards the DBKL
summons, the determination of such issue depended on whether there was an
oral collateral contract or common assumption by way of estoppel to vary the
contract to an extent.
Held, allowing the Plaintiff’s claim with costs but dismissing the Defendant’s
counterclaim:
(1) Based on the evidence, there could be no doubt that contract prevailed
over procedure and that the absence of Defendant’s signature was not fatal
to the Plaintiff pursuing a claim based on the statement of final account
which was confirmed by all the consultants to the project. The Plaintiff’s
claim for the amount due and owing to it under the final statement of
account after taking into account previous payments ought to be allowed.
The Plaintiff ought to be entitled to pre-judgment interest and interest
from the date of judgment until full settlement.
(2) On the evidence, it was probable that the Defendant’s representative had
given an oral agreement that the Defendant would secure the approval
from DBKL for it to work beyond permitted hours and it would bear
the consequences arising therefrom. It was on the strength of such oral
collateral agreement that the Plaintiff signed the letter of award. Such
representation was collateral to the main contract and existed side by
280
Merger Insight (M) Sdn Bhd v Fairview Schools Bhd
side or alongside such main contract. This meant that the Plaintiff was not
liable to pay the summons arising from work beyond the permitted hours
based on the oral collateral contract that the Defendant would secure the
necessary approval to work beyond permitted hours and that it would
bear the consequences arising therefrom.
(3) The Court has the power open up, review and revise the certificates of
EOT. The Plaintiff’s claim in this regard ought to be allowed.
_____________________________________
NOTE: The Defendant appealed against the decision of the High Court to the Court
of Appeal, see Fairview School Berhad v Merger Insight (M) Sdn Bhd (Rayuan Sivil No:
B-02(w)-769-04/2016). The court unanimously concluded that the appeal and cross appeal
had no merits and dismissed the appeal with costs.
281
Murni Environmental Engineering Sdn Bhd v

Eminent Ventures Sdn Bhd & Anor and Other Cases
ORIGINATING SUMMONS NO: 24C–18–12/2015;
CIVIL SUIT NOs: 24C–6–03/2016, 24C–7–03/2016 & 24C–8–03/2016
SEE MEE CHUN J
30 AUGUST 2016
_________________________
[2017] 1 CIDB-CLR 282
The Second Defendant (“D2”) had appointed the First Defendant (“D1”) as the
main contractor in respect of a project. Pursuant to a Letter of Award, dated 18
February 2014, D1 appointed the Plaintiff to carry out a part of certain works
in the project. Owing to non-payment of claims, the Plaintiff served a payment
claim upon D1 under the Construction Industry Payment and Adjudication Act
2012 (“CIPAA”). By an adjudication decision dated 13 April 2015, the Plaintiff
was awarded an adjudicated sum. D1 had not filed any adjudication response
and was not present at the adjudication proceedings. D2 was not a party to
the adjudication. The Plaintiff applied to enforce the adjudication decision
against D1. Against D2, the Plaintiff sought for an order compelling D2 to pay
the adjudicated sum in the event the D1 failed and/or neglected to pay the
Plaintiff. The Plaintiff’s application against D2 was premised on s 30 of CIPAA.
D2 resisted the application.
Held, allowing the Plaintiff’s application against D2:
(1) Section 30 of CIPAA did not require the existence of a contractual

relationship but only that D2 be a principal. In this connection counsel for
D2 had conceded that D2 was a principal, but nevertheless on the facts of
the case, s 30 did not apply.
(2) All that was required under s 30 was for there to be a request by Plaintiff
to D2 as the principal for payment of the adjudicated sum; D2 to serve a
notice to the D1 on proof of payment and to state direct payment would
be made after the expiry of 10 working days of service of notice and in the
absence of proof of payment, D2 would pay the adjudicated sum to the
Plaintiff.
(3) Section 30(5) did not require that the money due and payable by D2 as the
principal to D1, being the party against whom the adjudication decision
was made, should be in reference to the claim made by the Plaintiff to
the progress claim in question. So long there was money due and owing
by D1, that money should be paid to the Plaintiff and D2 may recover the
said paid amount as a debt or set off from any money due or payable to D1
pursuant to s 30(4).
282
Murni Environmental Engineering Sdn Bhd v
Murni
Eminent Environmental
Ventures Sdn Bhd &Engineering Sdn Bhd
Anor and Other Casesv
(4) In the instant case, D2 had contravened s 30 by its failure to pay the said
amount as stated in the adjudication decision dated 13 April 2015 to the
Plaintiff upon its request for payment. The Plaintiff could therefore seek
to enforce the adjudication decision pursuant to the aforesaid section.
The purpose of CIPAA was to ensure that successful claimants are paid
promptly. In the instant case, payment ought to be made promptly either
by D1 or where D1 failed and/or neglected to pay, by D2 as the principal
pursuant to s 30 which was the enabling section.
283
Naim Engineering Sdn Bhd & Anor v

Pembinaan Kuantiti Sdn Bhd
HIGH COURT, KUCHING
ORIGINATING SUMMONS NO: KCH–24C (ARB)–1/6–2016
STEPHEN CHUNG HIAN GUAN J
29 DECEMBER 2016
_________________________
[2017] 1 CIDB-CLR 284
The Defendant filed a payment claim against the Plaintiff under the Construction
Industry Payment and Adjudication Act 2012 (“CIPAA”) for non-payment in
respect of certain construction works. The KLRCA appointed the Adjudicator
(“first Adjudicator”) to decide the claim. However the first Adjudicator resigned
by letter dated 12 April 2016. In the letter the first Adjudicator expressed his
views that there was no construction contract between the Plaintiff and the
Defendant, but he did not make an adjudication decision. The KLRCA thereafter
appointed the second Adjudicator who delivered his decision on 8 August 2016.
The Plaintiff applied to the High Court, for inter alia, declaratory relief to set
aside the decision of the second Adjudicator and to declare that there was no
construction contract between the Plaintiff and the Defendant.
Held, allowing the Plaintiff’s application substantially:
(1) There was no merit in the Plaintiff’s submission that the Director of
KLRCA had no jurisdiction to appoint the second Adjudicator in view of
the resignation of the first Adjudicator who did not deliver an adjudication
decision.
(2) The existence of an agreement depends upon the intention of the parties
who must be ad idem. It may be inferred from the language used, the
parties’ conduct having regard to the surrounding circumstances and
the object of the contract. The court would generally apply an objective
or reasonable man test. Where a contract is to be deduced from a set of
documents it is necessary to look into the whole of the correspondence
between the parties to see whether all the essentials of a valid contract
are present and the parties have come to a binding agreement. This is
essentially a question of fact.
(3) On the affidavit evidence adduced, there was no construction contract in

writing between the Plaintiff and the Defendant. There was no privity of
contract between the Plaintiff and the Defendant. The disputes for non-
payment were not between the Defendant and the Plaintiff. Since there
was no construction contract in writing between the Plaintiff and the
Defendant, pursuant to s 2 of CIPAA, it does not apply to the payment
disputes between the Defendant and the Plaintiff.
284
Naim Engineering Sdn Bhd & Anor v Pembinaan Kuantiti Sdn Bhd
(4) The Defendant’s claims against the Plaintiff were outside the applicability
of CIPAA. The Adjudicator had no jurisdiction to hear and determine the
Defendant’s claims against the Plaintiff. In doing so and in delivering
the adjudication decision, the Adjudicator had acted in excess of his
jurisdiction. The adjudication decision should be set aside.
285
Ocned Water Technology Sdn Bhd v Cypark Sdn Bhd

SUIT NO: 22C–22–09/2014
SEE MEE CHUN J
28 APRIL 2016
_________________________
[2017] 1 CIDB-CLR 286
By letter of award (“the LA”) dated 25 October 2011, the Defendant appointed
the Plaintiff as its subcontractor to undertake civil, structural, mechanical and
electrical work (including testing and commissioning) in relation to a leachate
treatment plant. The Employer was the Government of Malaysia (“GOM”).
The LA was terminated on 31 October 2012 due to alleged breaches by the
Plaintiff. The Plaintiff claimed for work done for a balance of RM1,336,262.11.
The Plaintiff’s claim was premised on its interim progress claim no 12. The
Defendant counterclaimed inter alia for value of remaining work not completed
and for liquidated and ascertained damages (“LAD”).
Held, allowing the Plaintiff’s claim, subject to certain deductions, but dismissing
the Defendant’s counterclaim:
(1) Based on the evidence, the Plaintiff was entitled to be paid based on
progress claim No 12. The contention that progress claim No 12 could
not be relied on as the Plaintiff had subsequently issued progress claim
No 13 did not hold. PW1 (the Plaintiff’s Managing Director) had given
cogent reasons for the circumstances under which progress claim No 13
was issued. PW1 had explained claim No 12 had never been superseded by
claim No 13 and it came about as the Defendant had wanted a discounted
price which PW1 said he did not mind if he was paid. Since there was no
payment he would go back to claim No 12 for his claim.
(2) Although there was delay caused by the Plaintiff and the Defendant was
entitled to terminate pursuant to clause 25 of the contract, the delay did
not have an effect on the Plaintiff’s claim based on progress claim No 12
for work done and materials supplied.
(3) The LAD of RM560,000 claimed by the Defendant was not the Defendant’s
actual loss suffered due to the Plaintiff’s delay. That was the LAD imposed
by the Employer upon the Defendant plus the cost of completing the
Plaintiff’s unfinished works. However, there was no proof of any LAD
imposed on the Defendant by its Employer.
286
PWC Bina Sdn Bhd v Kerajaan Malaysia & Anor

ORIGINATING SUMMONS NO: WA–24C–38–06/2016
LEE SWEE SENG J
14 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 287
The Plaintiff was the subcontractor of one SD Com Sdn Bhd (“SD Com”). SD
Com was awarded a contract by the First Defendant (“D1”), the Government of
Malaysia for a construction project (“the Project”). SD Com, in turn, appointed
the Plaintiff as its subcontractor for the entire Project. The entire work for
the construction of the Project was to be done by the Plaintiff. D1 had made
an advance payment of RM2,270,237.43 to SD Com. In return SD Com was
required to furnish a Bank Guarantee ("BG") to secure the repayment of this
sum. The BG was taken from the Second Defendant ("D2") United Overseas
Bank (Malaysia) Bhd ("UOB Bank") by the Plaintiff on behalf of SD Com. The
BG expired on 8 October 2014. It was extended on 20 March 2014 and was to
expire on 31 January 2015. On 23 January 2015 D1 terminated the Project and
made a call on the BG on 26 January 2015. The Plaintiff applied to court (the
"OS") and obtained an injunction restraining D1 from calling on the BG pending
the disposal of the OS. D1’s appeal to the Court of Appeal was dismissed. At
the hearing of the OS proper, the High Court held that the call on the BG by
D1 on 26 January 2015 was unconscionable and granted a declaration to that
effect. Against that declarative order D1 had appealed to the Court of Appeal
and the appeal had not been disposed of yet. Whilst the appeal was still
pending in the Court of Appeal and despite the declaratory order by the High
Court, D1 made another call on the BG on 26 May 2016; more than a year after
the expiry of the BG on 31 January 2015. The Plaintiff thus filed the present
suit seeking, inter alia, an injunction preventing any call on the BG until the
disposal of all claims and appeal and a declaration that D1’s call on the BG on
26 May 2016 was unconscionable. The Court granted the Plaintiff an ad-interim
injunction (this is an injunction ordered by the Court to protect the interest of
the plaintiff until the interim injunction is decided). The following issues arose
for determination; (i) Whether there is any prohibition against granting an ad-
interim injunction against the Government; (ii) Whether it was unconscionable
for the Government to make another call on the BG after a previous Court had
declared that the first call was unconscionable; and (iii) Whether there could be
a valid call on the BG after it had expired.
287
Held, allowing the application with cost:
(1) The locus classicus on the law and guiding principles on interlocutory
injunction is the House of Lord’s case of American Cynamid Co v Ethicon
Ltd [1975] 1 All ER 504 which have been adopted and applied time and
again in our Courts.
(2) In essence, the Court in granting the interlocutory injunction pursuant to

O 29 r 1 of the Rules of Court 2012 must consider the following factors:
(a) whether the claim against the Defendant on the facts before the Court
discloses a bona fide serious issue to be tried; (b) the Court must then
proceed to consider the balance of convenience between parties, namely,
whether the harm would be greater in granting the injunction or by its
refusal and arrive at a finding which party would suffer greater injustice;
and (c) whether damages is an adequate remedy.
(3) Although s 54(d) of the Specific Relief Act 1950 provides in general that
an injunction cannot be granted to interfere with the public duties of
the Government, s 29 of the Government Proceedings Act 1956 does not
prohibit the court from granting temporary or interlocutory injunctions
against the Government. There is no prohibition against the grant of an
ad-interim injunction against the Government of Malaysia, and more so
when the status quo needs to be preserved pending the disposal of the
Application inter-parte or pending the hearing of the main action. At
the hearing of the main action, no matter how justified the injunction is,
the Court may only grant a declarative order declaring the rights of the
parties.
(4) At the Court of Appeal level there was a divergence of views as to whether
an interim injunction may be granted against the Government or that it
may only be granted at the interim stage but not as a final relief. Where
there was a conflict of two decisions of the Court of Appeal, the High Court
was free to follow either one. The Court was at liberty to follow that which
would yield a just and fair solution while awaiting the hearing of the final
reliefs depending on the exigencies of each case and whether the conduct
of the government has been egregious. This was one case where an ad-
interim injunction ought to be given pending the hearing of the OS filed
and the final reliefs claimed.
(5) Unconscionability is a ground to restrain a beneficiary from calling on a

BG as separate from fraud.
(6) Applying the test of unconscionability to the facts of this case, as a

High Court in the 1st OS had declared that D1’s call on the BG was
unconscionable, it was not open for D1 to then again make another call on
the BG as they did here.
288
(7) Res judicata did not apply in that the present call on the BG was a different
call on the BG, being made on a different date. More importantly it was a
call made on the BG after it had expired. D1 had precipitated a situation
where the Plaintiff had no choice but to come to the court again and
D1 could not then be heard to say that the Court should dismiss the
Plaintiff's claim on ground of res judicata. It was D1 itself that deliberately
disregarded the declarative order of the previous High Court Judge that
compelled the Plaintiff to come back to Court once again for protection.
A Court may decline to follow the doctrine of res judicata where to do so
would lead to an unjust result.
(8) The second call on the BG had all the elements of an unfair advantage that
made it unconscionable. It was unconscionable as to allow a second call
on the BG would be inconsistent with equity and good conscience in as
much as it would be unfair and certainly lacking in good faith.
(9) The first demand on the BG before the BG expired was the subject matter
of the pending appeal in the Court of Appeal. To make another call on the
BG and this time after its expiry, was not just invalid and ineffective but
also an abuse of the declarative order of the Court and an affront to the
authority of the Court.
(10) The call by D1 on the BG on 26 May 2016 was unconscionable and in any
event the BG had expired and become void upon its expiry on 31 January
2015.
289
Perfect Stone Sdn Bhd v Syarikat Pembenaan Yeoh

Tiong Lay Sdn Bhd
LEE SWEE SENG J
25 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 290
The Defendant was the Main Contractor appointed by the Employer for a
construction project (“the Project”). The Defendant appointed the Plaintiff
for the Supply and Installations of Stoneworks (“the Subcontract Works”).
The Contractual Documents consisted of a Letter of Acceptance, Subcontract
Documents and Article of Agreement and Conditions of Building Subcontract
(“the Subcontract”). It was a term of the Subcontract that if there was any
dispute between the Defendant and the Plaintiff, the dispute had to be referred
to arbitration. The Main Contract between the Defendant and the Employer
was subsequently terminated as a result of non-payment by the Employer. The
Plaintiff then commenced this action against the Defendant alleging that a sum
of RM3,153,759.07 was due from and owing by the Defendant to the Plaintiff.
Upon being served with the Originating Summons and affidavit in support in
this suit, the Defendant entered appearance and filed the present application
for stay of proceeding pending reference to arbitration. The Defendant disputed
the Plaintiff’s claim alleging that the Plaintiff was responsible for all the loss
and damage suffered by the Defendant due to the Plaintiff’s failure to complete
the Subcontract Works within time. The Plaintiff argued that there was really
no dispute at all and that the application for stay should not be allowed.
Held, allowing the stay of proceedings pending reference to arbitration with no

order as to costs:
(1) So long as the matter is within the scope of the arbitration agreement,
and the party seeking a stay of the proceedings has not taken any other
steps in the proceedings, the Court shall grant the stay of the proceedings
unless the arbitration agreement is null and void, inoperative or incapable
of being performed. Section 10(1) of the Arbitration Act 2005 (“the Act”)
is couched in mandatory language in that once the requirements found in
the subsection are fulfilled, the stay of the court proceedings is mandatory.
The Court shall hold the parties to the bargain and shall give effect to the
arbitration agreement.
(2) In the event that the party applying for stay has taken any other steps in
the proceedings, it could then be argued that in spite of the arbitration
290
Perfect Stone Sdn Bhd v Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd
agreement that party has agreed to submit to litigation as the mode of

resolving the dispute between the parties. As an arbitration agreement is
a term of the contract, that term can be waived or varied by subsequent
agreement or conduct. Here the Defendant had not taken further steps
in the proceedings and had forthwith filed the application for stay of the
proceedings.
(3) The subject matter of the Plaintiff’s claim must be within the subject of
the arbitration agreement. The Plaintiff’s claim was with respect to a
matter within the scope and ambit of the arbitration agreement.
(4) The amendment effected on s 10(1) of the Act vide Act A1395 which came
into force on 1 July 2011 (“the 2011 Amendment”) effectively dispensed
with the need to prove that there was a dispute that had arisen between
the parties. In any event, on the present facts, there was a dispute that
had arisen between the parties that should be referred to arbitration for
resolution.
(5) Under s 10(1), as amended by the 2011 Amendment, the existence of a

dispute was no longer a criterion in deciding whether a stay should be
granted. The simple test is for the Defendant to show that the proceedings
are in respect of a matter which is the subject of the arbitration agreement
and the applicant has not taken any other steps in the proceedings and
further that the arbitration agreement is valid. Once these are met,
the Court is required to grant a stay of proceedings pending referral to
arbitration.
291
Petrojet Asia Sdn Bhd v

Lu Strong International Sdn Bhd
CIVIL APPEAL NO: 12AC–7–09/2015
LEE SWEE SENG J
19 AUGUST 2016
_________________________
[2017] 1 CIDB-CLR 292
The Respondent/Plaintiff had claimed for the payment of RM300,000.00 being

agreed compensation for termination of contract. In the Amended Statement
of Claim the Plaintiff had pleaded that the Second and Third Defendants (“D2
and D3”) had arranged for the Appellant/First Defendant (“D1”) to appoint
the Plaintiff as the Subcontractor for 10% of the Subcontract works. On 4 June
2012 a Subcontract was executed between the Plaintiff and D1. The Plaintiff
paid D2 and D3 a sum of RM300,000.00 being the finders’ fee and D2 and
D3 agreed to refund the said sum in the event the Subcontract works did not
take off 60 days from the date of the Official Receipt for the payment of the
finders’ fee. The Plaintiff gave notice of termination of the Subcontract by letter
dated 22 January 2014. D1 by letter dated 3 March 2014 agreed to the mutual
termination and agreed to make payment of RM300,000.00. The Plaintiff’s
claim against D1 was for agreed compensation under the mutual termination
of the Subcontract whereas the Plaintiff’s claim against D2 and D3 was for the
return of the finders’ fees of RM300,000.00. D1 by its Statement of Defence
raised the following issues: (i) that there were two conflicting Statements of
Claim with contradicting facts; (ii) that the capacity of the parties were not
clear and required clarification; (iii) that there was no final agreement between
the parties as the same was varied; (iv) that the letter dated 26 June 2014 was
a without prejudice letter and ought not to have been adduced by the Plaintiff;
and (v) that the Plaintiff’s Solicitors’ letters dated 11 June 2014 and 2 July 2014
contradicted the Plaintiff’s claim. D1 contended that in the Original Statement
of Claim it was stated as the Subcontractor, where the Plaintiff had awarded a
Subcontract to D1. However, in the Amended Statement of Claim, D1 was the one
who awarded the Subcontract to the Plaintiff. The capacities of the parties were
stated differently at 2 different times. The First Defendant appealed against the
decision of the Sessions Court Judge (“the Judge”) wherein the Judge allowed
the Plaintiff’s application for leave to record summary judgment.
(1) Amendments are allowed to be made where there has been a genuine
mistake on stating the description of the parties. Here the mistake was
instead of stating the Plaintiff was the Subcontractor, it had mistakenly
stated D1 to be the Subcontractor. Clearly from the Subcontract parties
292
Petrojet Asia Sdn Bhd v Lu Strong International Sdn Bhd
were left in no doubt as to who was who in the contract. This was the kind
of error where no one should capitalise on it and so justified a full trial.
(2) Between the Plaintiff and D1, the question was whether D1 had also
agreed to pay the Plaintiff the sum of RM300,000.00 and for that, the Court
had to be satisfied if there was a concluded contract as pleaded for such a
payment that was borne out by the documents referred to in the Plaintiff’s
affidavits. A trial is not to be had for the purpose of satisfying our curiosity
of some intriguing inquiries. There was no need for one to know why D1
had agreed to pay RM300,000.00 to the Plaintiff for payment which the
Plaintiff had paid to D2 and D3 now that the contract between the Plaintiff
and D1 had been mutually terminated. It had not been pleaded that there
had been fraud or coercion or misrepresentation and there had been no
suggestion that there had been no consideration for the contract.
(3) There was no rationale for a trial merely because D2 and D3 had chosen
not to file any application and affidavit to set aside the judgment in default
entered by the Plaintiff against D2 and D3.
(4) The Plaintiff by its letter dated 22 January 2014 terminated the
Subcontract. D1 by its letter dated 3 March 2014 agreed to this proposal
of a mutual termination and to the payment of compensation of
RM300,000.00 on or about 15 March 2014. The Plaintiff’s letter of 22
January 2014 read together with D1’s letter of 3 March 2014 had all the
elements of a valid, binding and enforceable contract in that there was
an offer and acceptance, a consideration and a clear intention to create a
legal relation. Hence, as at 3 March 2014 a concluded settlement contract
had come into being.
(5) The terms of payment of RM300,000.00 as agreed consideration for

the compensation had been agreed for the mutual termination of the
Subcontract Agreement. Though the parties could not agree on the
extension of time to pay and on interest payable and on the two guarantees
to be furnished that did not reopen or annul for fresh negotiation the
whole of the settlement.
(6) D1 had used its solicitor’s letter dated 26 June 2014 in their affidavit in
support which had been affirmed by Johnathan Francis (who was D1’s
Executive Chairman) on 11 November 2014 in their application to set
aside the Judgment in Default. D1 had adduced its solicitor’s letter as
exhibit JFA-5. Therefore, D1 had waived the privilege of the said letter.
(7) No useful purpose would be served by going for trial. The same documents
that had already been produced in this application would be produced at
the trial. As the documents spoke for themselves, there was no justification
of going for trial to satisfy one’s curiosity as to the relationship that D2
and D3 may have had with D1.
293
Projek Penyelenggaraan Lebuhraya Berhad v

Capai Lumayan Sdn Bhd
CIVIL APPEAL NO: WA–12B(NCVC)–60–04/2016
ROSLAN BIN A BAKAR JC
19 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 294
The Appellant/Defendant had awarded to the Respondent/Plaintiff a project

for the execution and completion of Proposed STP and Water Supply System
Upgrading Works. The Respondent claimed to have completed the works based
on the terms of the letter of award. The Respondent contended that the Appellant
had failed to pay and settle the contract price. The Appellant disputed this claim
contending that the Respondent had failed to complete the works. The issues
which arose for determination were: (i) whether the Respondent had completed
the whole project within time; (ii) whether the Respondent had carried out the
defects rectification works within the defects rectification period; (iii) whether
the Respondent was entitled to payment on the entire value of the project based
on final accounts; (iv) whether the Appellant was entitled to make deductions
from the payment; (v) whether the Respondent had delayed in completing the
works; (vi) whether the Appellant had incurred losses and additional costs due
to the delay or failure of the Respondent in completing the required works. The
Sessions Court Judge had allowed the Respondent’s claim for accrued payments
amounting to RM273,512.33 for the works carried out. The Appellant appealed
against this decision.
Held, allowing the Appellant’s appeal with costs:
(1) Since 11 June 2012, the Respondent had been reprimanded for the slow
execution of the works. The Appellant was not satisfied with the delay
in the project works by the Respondent. Twice extension of time was
granted by the Appellant for the completion of the works.
(2) The Certificate of Practical Completion ("CPC") dated 7 May 2013 issued
by the consultant certified that the Respondent had completed the project
works on 3 April 2013. The CPC also stated that the Respondent was
subjected to the carrying out of defects rectification works and also to
the carrying out of the outstanding works within the time allocated under
clause 48.1 of the contract. Hence, the CPC was not a conclusive document
stating that the works had been totally completed by the Respondent but
was still subject to the rectification and outstanding works.
294
Projek Penyelenggaraan Lebuhraya Berhad v Capai Lumayan Sdn Bhd
(3) SD5 (the site manager) testified that he did not have the authority
to certify that the defects rectification works had been completed or
accepted by the Appellant and PLUS. SD5’s signature in Exhibit P16 was
only a confirmation that the defects rectification works had been carried
out by the Respondent and not that the said works had been properly
carried out as required and accepted by the Appellant and PLUS.
(4) No Certificate of Making Good Defect was issued by PLUS in relation to

the defects rectification works. This would have been a confirmation by
PLUS that the defects rectification works had been carried out properly
to the satisfaction of PLUS. With the absence of this certificate, there was
no confirmation that the defects rectification works had been properly
completed to the satisfaction of PLUS and therefore clearly showed that
the condition contained in the CPC had not been complied with. Hence,
the Respondent had not properly completed the whole project awarded
to it.
(5) The Respondent therefore was not entitled to receive payment for the
entire value of the project which was carried out based on final accounts.
The Appellant was entitled to make deductions from the entire value of
the works carried out. The Respondent delayed in completing the work.
The Appellant had incurred losses and additional costs due to the delay
and / or breach of the Respondent in completing the required works.
295
Ranchan Heavy Engineering Sdn Bhd v

Pelabuhan Tanjung Pelepas Sdn Bhd
ORIGINATING SUMMONS NO: 24NCC–77–03/2016
KHADIJAH BINTI IDRIS JC
30 NOVEMBER 2016
_________________________
[2017] 1 CIDB-CLR 296
The Defendant appointed the Plaintiff as a contractor pursuant to a Loading,

Unloading & Transportation Contract dated 27 October 2014 (“the contract”)
to load and unload quayside container cranes (“QCCs”) from the Defendant’s
port to a jetty and fabrication yard and the return of the QCCs from the
fabrication yard back to the port. A total lump sum price was to be paid by the
Defendant to the Plaintiff under the contract. The said contract also provided
that the timeline in the schedule of works may be subject to any amendment
made by the Defendant’s representative or due to variations instruction issued
by the Defendant’s representative. A dispute arose between the parties in
relation to the delays and disruptions arising from several rescheduling of the
transportation of the QCCs from the fabrication yard to the port. Both parties
brought the dispute before an adjudication proceeding under the Construction
Industry Payment and Adjudication Act 2012 (“CIPAA”), resulting in a decision
in the Defendant’s favour. Hence the Plaintiff applied under s 15 of CIPAA to set
aside the Adjudication Decision contending that the Adjudicator had acted in
excess of jurisdiction and there was also denial of natural justice. The Plaintiff
submitted that the Defendant’s failure to serve any Payment Response under
s 6(2) of CIPAA meant that by virtue of s 6(4), the Defendant was deemed to
have disputed the entire Payment Claim and that under such circumstances the
only matter referred to adjudication was the Plaintiff’s Payment Claim served
under s 5 of CIPAA. Therefore the Defendant was not entitled to raise issues
except for patent or manifest error on the face of the record and any arguments
that went into the merits of the claim could not be such an error and was thus
inadmissible. The Plaintiff contended that the Defendant’s defence forwarded
in the adjudication proceeding that there was no agreement as to the pricing for
the variations went into the merits and ought not to be considered. Nevertheless
the Adjudicator dealt with those issues and by doing so Adjudicator had
overstepped the statutory boundary of his jurisdiction. Furthermore, the
Plaintiff argued that the Adjudicator’s failure to consider s 36 of CIPAA (which
provides for default provision in respect of progress payment) was an error of
law and therefore the Adjudicator had exceeded his jurisdiction. As regards the
quantum awarded, the Plaintiff claimed that the Adjudicator failed to assess the
quantum with reference to the factors set out in Regulation 7 of the Construction
Industry Payment and Adjudication Regulations 2014 (“CIPAA Regulations”)
but simply accepted the amount stated in an invoice produced by the Defendant
296
Ranchan Heavy Engineering Sdn Bhd v Pelabuhan
Pelabuhan Tanjung
Tanjung Pelepas
Pelepas Sdn
Sdn Bhd
Bhd
and awarded the entire sum. Furthermore, the Plaintiff alleged, inter alia, that
the Adjudicator’s rejection of the Plaintiff’s request to comment on a material
authority relied on by the Defendant was a breach of natural justice.
Held, dismissing the Plaintiff’s application with costs:
(1) Section 27(1) of CIPAA provided that the jurisdiction of the Adjudicator
was limited to the Payment Claim and Payment Response. In the absence
of a Payment Response, the Adjudicator would have to be content with the
Payment Claim. In WY Steel Construction Steel Construction Pte Ltd v Osko
Pte Ltd [2013] SGCA 32 the Court held that failure by a non-paying party to
file a Payment Response did not preclude them from raising patent error
on the face of the material before the learned Adjudicator. Accordingly the
Defendant was entitled to raise patent or manifest error in the Payment
Claim. However such error must be plain and evident on the face of the
material that was properly before the Adjudicator.
(2) One of the vital provision which formed the basis of the Plaintiff’s claim
was clause 2.13 of the contract which governed matters relating to
variations including the mechanism to determine the change (if any) in
the contract sum as a result of variations instructed by the Defendant. The
Adjudicator, having found a variation (i.e. to the commencement date),
considered whether the increase in cost (as a result of the said variation)
as alleged by the Plaintiff was mutually agreed in accordance with clause
2.13 of the contract. As the Plaintiff’s Payment Claim was grounded on that
clause, it was perfectly legitimate for the Adjudicator to have considered
compliance of the said clause, that is, whether both parties had agreed to
the additional costs which arose from the variation. The Adjudicator was
empowered to inquisitorially take the initiative to ascertain the facts and
the law for purpose of adjudicating the dispute before him and decide on
those issues (see s 25(i) of CIPAA).
(3) The Adjudicator was obliged to adjudicate and consider the materials
before him, namely, the Payment Claims details together with the
documents supporting the claims in order to make an independent and
impartial decision. This entailed, amongst other, determining whether
clause 2.13 of the contract was complied with by both parties. The
Adjudicator deliberated the various circumstances which led to the
variation of the commencement date. Having considered the materials
produced by the Plaintiff, the Adjudicator then made a finding that there
was no evidence to support the Plaintiff’s Payment Claim. Thus the
Plaintiff had failed to prove that the additional costs incurred arising from
such variation was agreed by the Defendant.
(4) Based on the aforesaid, the Adjudicator did not act in excess of jurisdiction
when he considered the Pricing Agreement issue. The Adjudicator was
duty bound to consider all materials before him in order to determine the
297
validity of the claim made by the Plaintiff. The basis on which the Plaintiff
initiated its claim would have to be considered, namely, the provisions
in the contract as that vital document set out the agreements of both
parties as to how the said contract was to be administered, managed and
performed. Therefore the said contract which had manifestly incorporated
the mutual agreements of both parties must be given due effect.
(5) Accordingly, the Court disagreed with the Plaintiff’s argument that the
Pricing Agreement issue went into the merits. The said issue was an
issue which arose out of the Plaintiff’s Payment Claim. Obviously it was
not a new issue raised by the Defendant. It was also not an issue which
the Plaintiff was not aware of, let alone prejudiced by it. On the face of
the Plaintiff’s Payment Claim the issue was simply whether such claim
was valid under clause 2.13 thereto. Since the Defendant’s position was
that such claim was plainly erroneous, the Defendant was entitled to raise
such issue for the determination of the Adjudicator.
(6) Since it was mutually agreed by both parties that the increment or
decrement of the contract sum (of the Loading, Unloading & Transportation
Contract) due to any variation was to be mutually agreed by both parties,
such agreement must be given due effect. Whilst CIPAA was a statute
intended to facilitate, amongst other, regular and timely payment and to
provide remedies for the recovery of payment, the rights and obligations
of the parties was governed by the terms and conditions of the contract
executed between the parties. Therefore s 36 of CIPAA was only relevant
and applicable if parties to the contract did not provide a mechanism
relating to the calculation of value of variation. Since there was already
a mechanism in place, s 36 was not relevant. Accordingly the failure of
the Adjudicator to consider s 36 was not an error of law and he had not
exceeded his jurisdiction.
(7) Regulation 7 of the CIPAA Regulations provided the relevant circumstances

for an Adjudicator to consider when determining quantum of costs. It
was to be noted that the circumstances listed in the said regulation were
not exhaustive as it allowed an Adjudicator to consider other relevant
circumstances. The mere fact that the Adjudicator did not expressly set
out and discuss one by one the circumstances in reg 7 was not sufficient to
amount to Anisminic error (i.e. where an error of law would be disclosed
if the decision-maker asked himself the wrong question or took into
account irrelevant considerations or omitted to take into account relevant
considerations). As such the Adjudicator did not exceed his jurisdiction
when deciding on the quantum of costs.
(8) The Adjudicator had exercised his discretion reasonably when he

rejected the Plaintiff’s request “to comment”. The request to comment
was actually a disguise to request for submission. If the Plaintiff was given
the opportunity to further reply, this may most probably prompt the
298
Ranchan Heavy Engineering Sdn Bhd v Pelabuhan
Pelabuhan Tanjung
Tanjung Pelepas
Pelepas Sdn
Sdn Bhd
Bhd
Defendant to request to further comment or submit. If time was extended,

this would inevitably put a constrain on the Adjudicator to prepare and
deliver his decision which must be delivered within the time stipulated in
s 12(2)(a) of CIPAA. Taking into account the circumstances, the rejection
of the Plaintiff's request was not a breach of natural justice.
299
Ranhill E & C Sdn Bhd v Thyssenkrupp

Industries (M) Sdn Bhd & Anor
LEE SWEE SENG J
30 AUGUST 2016
_________________________
[2017] 1 CIDB-CLR 300
The First Defendant (“D1”) had appointed the Plaintiff to carry out certain
construction works in a 1,000 megawatt power plant construction project (“the
Project”). The documents including a Letter of Intent, a Work Order and the
Accepted Commercial Terms & Conditions collectively formed the Contract
between the Plaintiff and D1 (“the Contract”). The terms and conditions of
the Contract were, inter alia, that D1 was to provide an advance payment in
the sum of RM2,450,000.00 to the Plaintiff being 10% of the Contract Sum for
the commencement of the initial scope of works by the Plaintiff (“the Advance
Payment”). The Advance Payment was to be made against the submission of a
Bank Guarantee (“BG”) in favour of D1. The BG was to remain valid until the
expiry of 90 days beyond the completion or performance of the initial scope
of works. The Plaintiff provided D1 with the Second Defendant’s (“D2”) BG as
security for the Advance Payment. The conditions of the BG specifically stated
that D2 undertook to pay to D1 on first demand and without any demur an
amount not exceeding RM2,450,000.00. The BG was extended on two occasions.
D1 was not aware of the second extension of the BG to 12 November 2015 as
this was not communicated by the Plaintiff or D2 to D1. At any rate there was a
time between 12 August 2015 and 17 August 2015 when the BG had expired. D1
had made a call on the BG by their letter of 6 August 2015 to D2 which call was
reiterated and repeated by D1’s subsequent letters to D2 dated 22 September
2015 and 3 November 2015. The Plaintiff claimed that as works progressed
it submitted its various progress claims in the form of Invoices and from
these Invoices, 10% was deducted as progressive recoupment of the Advance
Payment. As at 9 January 2015, D1 had recouped an amount of RM858,476.48
of the Advance Payment. The Plaintiff claimed that Invoices Nos 17, 18 and 1
A/W amounting to RM4,632,155.00 remained outstanding. According to the
Plaintiff, D1 had wrongfully, unreasonably and without just cause refused to
make payment of the sums which were due and payable to the Plaintiff. The
Plaintiff claimed that the delays in the works were the result of factors beyond
its control or otherwise attributed to D1 who had wrongfully and in bad faith
restricted and / or denied the Plaintiff access to the Project Site. Hence, the
Plaintiff contended that the call on the BG was unconscionable. The Plaintiff
prayed for, inter alia: (i) a declaration that the Plaintiff was entitled to recall and
/ or revoke the BG or to recover the value thereof since its obligation to maintain
a valid BG in favour of D1 had lapsed and / or expired; (ii) a declaration that D1
was prohibited and / or estopped from calling on the BG; and (iii) a declaration
300
Ranhill E & C Sdn Bhd v Thyssenkrupp Industries (M) Sdn Bhd & Anor
that it was unconscionable for D1 to call on the BG. The Plaintiff’s counsel had
also applied for a stay of this judgment pending appeal on the grounds that D1
had no assets within jurisdiction and its parent company, being an India-based
company, its assets were probably in India.
Held, dismissing the claim:
(1) Invoice No. 1A/W for the sum of RM3,845,205.00 issued by the Plaintiff to
D1 was in respect of what the Plaintiff said was the additional man hours
provided by the Plaintiff. The Plaintiff was claiming based on a rate of
RM135.00 per man hour. D1 was unable to make any meaningful
assessment of Invoice No. 1 A/W.
(2) The proper forum to ascertain whether or not there were any sums owing
by D1 to the Plaintiff for the disputed Invoice No. 1 A/W was via litigation
in Court or arbitration. All that the Court presently needed to decide was
whether the action of D1 with respect to the non-payment on Invoice No.
1 A/W was unconscionable.
(3) D1 had bona fide grounds to dispute the said Invoice and for the moment
could withhold payment to the Plaintiff. Clearly it could not be said to be
unconscionable for D1 to call upon the BG to recoup the balance of the
Advance Payment that could not be recoverable as the Plaintiff had either
stopped or abandoned or failed to complete the works.
(4) A genuine dispute could not be used, must less abused to form a claim
of unconscionability. A genuine contractual dispute such as the parties
had with regard to Invoice No. 1 A/W could not be elevated to the level of
unconscionable conduct on the part of D1.
(5) The call made by D1’s letter dated 6 August 2015 on D2 was a valid call on
the BG because that BG did expire on 12 August 2015. A call once validly
made does not become invalid just because the BG that had expired was
subsequently renewed. The demand does not lapse merely because the
BG had subsequently been renewed. Neither does the call expire upon the
renewal of the BG. The call made by D1’s letter of 6 August 2015 had the
effect of preventing time from running against the BG.
(6) An appeal does not act as a stay of execution. Difficulty in enforcing a

judgment against D1 should the Plaintiff be successful on appeal to the
Court of Appeal was not a special and exceptional circumstance warranting
stay of the judgment. There was no evidence that D1 was facing financial
difficulties or otherwise insolvent or that should the Plaintiff be successful
on appeal, D1 would not be able to refund the payments that may be so
ordered by the Court of Appeal. At any rate D1 had ongoing projects in
this country and it was an international conglomerate who would not
suffer its good name being sullied through non-payment of a judgment of
Court.
301
Ribuan Seni Sdn Bhd v Jack-In Pile (M) Sdn Bhd

SUIT NO: 22C–22–09/2015
SEE MEE CHUN J
31 OCTOBER 2016
_________________________
[2017] 1 CIDB-CLR 302
The Plaintiff was appointed by the Defendant as the subcontractor for excavation
and construction of pilecaps and starter bar (including column stumps) (“the
work”) for the piling and sub structure work in respect of a condominium
housing project. The Defendant was the nominated subcontractor for the piling
and sub structure work. There had been 2 letters of award (“LA”) issued. Issue
arose as to whether the revised LA bound the Plaintiff as it had not accepted
some of the terms therein. The Plaintiff had submitted 5 progress claims.
The Plaintiff received 3 payment certificates from the Defendant. The Court
had to consider the items of claim where there was a difference in value by
considering the Plaintiff’s claim first and then the Defendant’s counterclaim.
The 1st difference was under “pile cap work” where the Plaintiff claimed
RM2,314,350.49 and the Defendant certified RM 2,181,126.32 giving a
difference of RM133,224.17. The work under this item was broken into various
components such as pile cap excavation, lean con and others. The reason for the
difference arose from the Plaintiff having claimed for work on 5 pile caps which
the Defendant said had not been certified by their consultant. The Defendant
pleaded that the Plaintiff had failed to perform its duties when the Plaintiff
failed to provide protection to the piles installed by the Defendant and because
of the Plaintiff’s failure, the Defendant suffered loss and incurred additional
costs amounting to RM 107,907.03 for installing the sheet pile. The Defendant
also contended that it had a duty to mitigate the losses and was entitled to claim
for the means of remedying the inconvenience caused by the non-performance
of the contract. The Defendant further pleaded that as a result of the Plaintiff’s
negligence and wrong method of work the piles installed by the Defendant had
been damaged where the Plaintiff had caused the piles to be broken and/or
tilted. The Defendant claimed it suffered losses in having to buy additional piles
and labour costs. It was the Defendant’s case that the piles were handed over
in good condition and had been broken due to the Plaintiff not having put in
sheet piles. The issue thus was the condition of the piles on hand over. It was
common ground Plaintiff left the site on or about 9 January 2013. The Plaintiff
claimed it was asked to leave the site by the Defendant whereas Defendant said
that the Plaintiff abandoned the site. It was not disputed that the Defendant
had purchased on the Plaintiff’s behalf certain materials and the cost was to
be deducted from progress payment for work done. The issue arising was
whether the Defendant could impose a 3% administrative charges on the value
of materials purchased.
302
Ribuan Seni Sdn Bhd v Jack-In Pile (M) Sdn Bhd
Held, allowing the Plaintiff’s claim and dismissing the Defendant’s counterclaim:
(1) The revised LA was binding on both parties given that the Plaintiff had in
fact entered the site and carried out work and made progressive claims
and there were payment certificates issued pursuant thereto. Thus, the
Plaintiff’s claim was premised on revised the LA.
(2) On a balance of probability the 5 pile caps had been done and Plaintiff
was entitled to claim for it. On the value to be attached to the work on the
5 pile caps, PW3 (the Plaintiff’s Quantity Surveyor and expert witness)
had calculated the amount to be RM86,387.40, not including the stumps.
Since there were various components to the claim on pile cap work the
differential amount as claimed was awarded.
(3) With regard to the column stump the Court accepted the calculation done
by Defendant to be the correct one based on the agreed formula. This
meant the difference was RM265,802.42.
(4) On the enlargement of pile caps, the difference was attributed to the
additional labour charges incurred which the Plaintiff had not proved the
actual cost incurred.
(5) The Defendant had not proved that sheet piles came within planking and
strutting especially where there was no such item for sheet piles. Further
the cost of such sheet piles were for the period after the Plaintiff had left
the site wherein the remaining work was done by another contractor.
From the evidence, the purchase of sheet piles were for the period after
the Plaintiff was not on the site. This gave rise to the question why the
Plaintiff ought to be responsible if it was indeed responsible in the first
instance.
(6) On the issue of mitigation, no notice was ever given to the Plaintiff of the
Defendant’s intention to mitigate and claim from the Plaintiff. Further
mitigation could only arise where it has been proven the sheet piles came
within the meaning of planking and strutting which the Defendant had
not done. Accordingly the Plaintiff was not responsible for the costs of
installing the sheet piles.
(7) It was probable that the Defendant’s own piling activity may have been
the cause of the broken piles. The Plaintiff had established there were no
records available to the Plaintiff to show the condition of piles on hand
over to be good and there was no notice given to the Plaintiff of the damage
it had caused. The damage could also probably be due to other factors
such as movement of the Defendant’s jack-in pile or piles not properly
installed. On a balance of probability, the Defendant had not proved the
condition of piles on hand over or that the broken piles were caused by
the Plaintiff.
303
(8) The evidence showed that the Plaintiff had no intention to abandon work
and it must have done so pursuant to DW6’s (the Defendant’s Managing
Director) oral instruction. The sequence of events unfolding after 9
January 2013 also pointed towards the Defendant asking the Plaintiff
to leave. Since the Plaintiff did not abandon the site but was instead
instructed to leave, it followed it was entitled to loss of profit and that the
Defendant was not entitled to the cost of additional work.
(9) From the evidence, the Plaintiff’s conduct was consistent with its position
there was no agreement to impose the 3 percent administrative charges.
Further the Plaintiff had objected to the imposition of such charges by letter
dated 28 November 2012 that it was their understanding no additional
charges would be imposed. On a balance of probability, the Defendant had
agreed to purchase the materials without any administrative charges.
(10) Section 71 of the Contracts Act 1950 requires the act of purchase to be
done “not intending to do so gratuitously”. In this regard the Defendant
had not discharged the burden of proving it had not intended the act to be
gratuitous. This was because it had not shown the Plaintiff was aware it
would be imposed the administrative charges for the purchase.
304
Sazean Engineering & Construction Sdn Bhd v
Sazean Engineering & Construction Sdn Bhd v Bumi
Bumi Bersatu
Bersatu Resources
Resources Sdn
Sdn Bhd
Bhd
Sazean Engineering & Construction Sdn Bhd v

Bumi Bersatu Resources Sdn Bhd
LEE SWEE SENG J
29 DECEMBER 2016
_________________________
[2017] 1 CIDB-CLR 305
The Claimant had three (3) adjudication decisions in its favour and against
the Respondent. The Respondent filed various applications in the High Court
inter alia, to set aside the decisions. The Respondent complained that the
Claimant did not have the capacity to proceed with the adjudications and to
oppose the various applications filed by the Respondent. The Respondent also
complained that the solicitors who represented the Claimant in the adjudication
proceedings and in the various applications did not have the authority to
represent the Claimant. The Respondent argued that the Claimant had only one
valid director then and that the other director had been made a bankrupt prior
to the adjudication. It was also argued that the Claimant, being a company, had
ceased to exist and that at the very least, it was paralyzed from bringing the
adjudication proceedings and opposing the Respondent’s applications to set
aside the adjudication decision. It was furthermore argued that the adjudication
decision was null and void for illegality and ought to be set aside. The issues
for the High Court’s determination were: (i) whether the various construction
contracts executed by the bankrupt director of the Claimant were valid contracts
upon which adjudication could proceed; (ii) whether the Claimant’s Counsel
had due authority to act for the Claimant in the proceedings before this Court;
and (iii) whether a stay of the adjudication decisions should be made.
Held, dismissing the application to set aside the adjudication decisions with
costs, and allowing the enforcement of the adjudication decisions with costs:
(1) The saving provision in s 127 of the Companies Act 1965 (“CA 1965”)
was there not just to protect third parties dealing with the company,
but also to protect the company itself against those who may want to
take advantage of the act of bankruptcy of the director concerned. The
construction contracts entered into by the Claimant and executed on its
behalf by the bankrupt director were nevertheless valid construction
contracts upon which adjudication could proceed. They were not null and
void or illegal and because of the saving provision (s 127 of CA 1965), the
adjudication decisions given were not improperly procured through fraud
under s 15(a) of the Construction Industry Payment and Adjudication Act
2012 (“CIPAA”), under which provision the Respondent had sought to set
aside.
305
(2) There were initially two (2) directors of the Claimant. After one director
had been adjudicated a bankrupt, though he was disqualified as a director,
his office as a director was not vacated immediately. He would have
committed an offence both under s 125(1) of CA 1965 as well as under
s 38(1)(d) of the Bankruptcy Act 1967. However his action continued to
bind the company that he represented. His actions bound outsiders who
would be dealing with the company, unaware of his disqualification.
(3) Just because the number of directors had fallen below the minimum
number of two (2) did not mean that the company was non-functional
or paralyzed as the salaries would still have to be paid, contractual
commitments had still to be met, statutory filings would still have to be
and assets of the company would still be available for judgment creditors
to execute on. A company would exist until it is wound up, dissolved and
finally struck out by the Registrar of Companies. Until then it could sue
and be sued provided the last two (2) directors would still authorise the
action though the disqualified directors would have committed an offence.
(4) The saving provision was not only to protect innocent third parties
who did not know of the disqualification of any of its directors but also
to protect the company itself which was a separate legal entity from its
shareholders and directors from being taken advantage of by third parties.
Any attempt to continue as a director after an act of disqualification, such
as being adjudicated a bankrupt, would expose that director to criminal
prosecution. The company of which the bankrupt was a director was
still safe and intact by virtue of the combined operation of ss 122(6) and
127 of CA 1965. In the instant case, the disqualified director’s actions in
authorizing the adjudication proceedings and the court proceedings were
valid under s 122(6) read with s 127 of CA 1965.
(5) There were merits in the submission of counsel for the Claimant that two
(2) others were acting as de facto directors of the Claimant during the
material time and they were both directors within the meaning of s 4 of
CA 1965.
(6) There was no good reason shown in the affidavits for a stay. The
Respondent had also not shown any special circumstance for a stay.
The Court must always bear in mind the overarching purpose of CIPAA
which is to facilitate cash flow in the construction industry by ensuring
that employers that derive benefits from the construction works do pay
the various progress claims as may be certified and that such payments
should cascade down to the contractors and subcontractors below the
chain.
306
Scomi Transit Projects Sdn Bhd v Prasarana Malaysia Bhd
Scomi Transit Projects Sdn Bhd v

Prasarana Malaysia Bhd
LEE SWEE SENG J
13 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 307
The Defendant and Scomi Rail Bhd on 3 June 2011, entered into the Kuala
Lumpur Monorail Fleet Expansion Project Contract (“Principal Contract”) for
the purposes of undertaking the engineering, procurement, construction and
commissioning and provision of warranty (“Works”) for the Kuala Lumpur
Monorail Fleet Expansion Project (“the Project”). The Defendant, Scomi Rail
Bhd and the Plaintiff entered into a Novation Agreement where all the rights
and liabilities of Scomi Rail Bhd under the Principal Contract were novated
to the Plaintiff. Along the way the Plaintiff and the Defendant (“the Parties”)
entered into other agreements during the course of the Principal Contract with
the aim of an orderly completion of the Works. The relevant agreements were
the First Supplemental Agreement dated 16 April 2014 (“FSA”) and the Second
Supplemental Contract dated 15 April 2015 (“SSC”) (the Principal Contract,
the FSA and the SSC were collectively referred to as the “Contract”). There
were considerable delays in construction and commissioning of the Works.
The Defendant then issued a Notice of Termination dated 9 June 2016 to the
Plaintiff. It was a term of the Principal Contract in clause 4.2.1.2 that the agreed
Performance Bond (“PB”) must be kept valid until the completion of the Works
and the remedying of any defects. However, the Plaintiff did not renew the PB.
Instead, the Plaintiff requested the Defendant for a waiver of the requirement
of the PB until 30 June 2016 but this request was rejected by the Defendant.
The Defendant’s Notice of Termination to the Plaintiff was pursuant to clause
15.2.2 of the Principal Contract by virtue of the Plaintiff’s failure to comply
with its obligation under clause 4.2.1.2 of the Principal Contract to maintain
and renew the PB so that it remained in full force and effect until the Plaintiff
had fully executed and completed the Works. The Plaintiff contended that the
Defendant’s termination of the Contract was unconscionable and unlawful and
that the Defendant was estopped from terminating the Contract as the delay
was attributable to the Defendant and further that parties were negotiating
a fresh Remedial Plan for the completion of the Project. The Plaintiff filed
Enclosures (“Encls”) 4 and 5 seeking to injunct the Defendant under s 11(1)(h)
of the Arbitration Act 2005 (“the Act”) from terminating the Contract pending
arbitration on the ground that the Defendant’s Notice to Terminate was
unlawful, unconscionable and issued in bad faith and therefore invalid in fact
and law. The Court had earlier heard Encl 5 on an ex-parte basis and granted an
ex-parte injunction.
307
Held, discharging the ex-parte injunction and dismissing both Encls 4 and 5
with costs:
(1) In the case of Plaza Rakyat Sdn Bhd v Datuk Bandar Kuala Lumpur [2012]
7 MLJ 36, the Court in hearing an application for interim injunction
pending arbitration under s 11 of the Act, adopted the elements laid down
in the case of Keet Gerald Francis Noel John v Mohd Noor bin Abdullah & Ors
[1995] 1 MLJ 193.
(2) Until the Plaintiff completed the Works and remedied the defects, the
Plaintiff had a continuing contractual obligation to renew the PB and
if it should fail to renew the bond then the Defendant was entitled to
terminate the Contract under clause 15.2.1(a) of the Principal Contract.
The Plaintiff’s obligation under clause 4.2 of the Principal Contract was
wholly independent of any other assertions, contentions, disputes, claims,
breaches, complaints and allegations between the parties. There was thus
absolutely no link or nexus between a wholly independent obligation to
furnish a PB, and the monetary claims by the Plaintiff. The clear failure
by the Plaintiff to comply with its obligation under the Principal Contract
could be taken cognizance of by the Court without the need to call for
further investigation.
(3) The Defendant had the absolute and independent right to terminate the
Principal Contract as clearly stipulated in clause 15.2.2 of the Principal
Contract when it issued its Notice to Terminate dated 9 June 2016.
There was no basis for saying that such a termination was unlawful,
unconscionable and in bad faith and therefore invalid in fact and law. At
the very least such a termination was not a serious issue to be tried for the
purpose of this injunction.
(4) The Plaintiff’s argument that the Defendant had earlier failed to assert its
right under the Principal Contract and was now estopped from exercising
its right under clause 14.2.1 of the Principal Contract in issuing the
termination notice was clearly baseless. At all material times, the Plaintiff
was well aware of the continuing obligation to maintain a PB that would
remain in full force and effect until the completion of the Works. The
Principal Contract was conditional upon the PB.
(5) This was not a case where the Defendant’s delays in making progress
payments had impeded the Plaintiff’s ability to carry on the Works or
caused a delay in the Works schedule. This was more a case where there
was serious and persistent delay by the Plaintiff in carrying out the Works
because of the Plaintiff’s lack of financial resources to expedite the Project
when it had fallen behind schedule.
(6) Having negotiated on the basis that the Principal Contract was binding
at all times until its terms were varied by a concluded contract on the
308
Scomi Transit Projects Sdn Bhd v Prasarana Malaysia Bhd
Remedial Plan, the Plaintiff could not now be heard to say that that the
termination of the Contract for breach of the said clause (i.e. clause
4.2.1.2) was a serious question to be tried.
(7) There were no serious questions to be tried. Assuming for a moment that
there were serious questions to be tried, damages would be an adequate
remedy in the circumstances of the case. No interim injunction should be
granted as the Plaintiff can be adequately compensated by damages for
losses suffered, if any.
(8) Considerations of public interest and the practical realities of the situation
at hand combined to significantly shift the balance of convenience in
favour of the Defendant to refuse the injunction. Given the Plaintiff was
clearly unable to comply with the timelines stipulated in completing
the Works, the Court would not grant an injunction for status quo to
remain. Otherwise, not only the Defendant and its stakeholder would be
prejudiced, the public at large would further suffer the inconvenience
caused by the Plaintiff’s failure to complete the Works.
(9) Generally an injunction is not given to prevent the termination of a

building, engineering or technology contract. Conversely, the Courts have
generally been inclined to grant injunctions to enforce an Employer’s
rights arising from a termination.
(10) An injunction in terms of Encls 4 and 5 would in effect be indirectly the

interim equivalent of a decree of specific performance of the Principal
Contract and SSC, whereby the Defendant would be compelled to
continue the relationship with the Plaintiff under a highly technical and
sophisticated contract. This was a situation not countenanced in law.
(11) By analogy, the underlying logic of Vethanayagam v Karuppiah & Ors [1968]
1 MLJ 283 and Subashini a/p Rajasingam v Saravanan a/l Thangathoray
and other appeals [2008] 2 MLJ 147 would apply to an application for
an interim injunction pending an arbitration under s 11(1)(h) of the Act
with the only difference being that instead of a trial, there would be an
arbitration. In the event a perpetual injunction was sought in the main
suit and was disallowed by s 54 of the Specific Relief Act 1950, it would
follow that an interlocutory injunction to the same effect sought under
inter alia, s 11(1)(h) of the Act and/or O 29 r 1 of the Rules of Court 2012
to preserve the status quo pending arbitration would also be disallowed.
309
Senga Engineering & Construction Sdn Bhd v

Richwin Holdings (M) Sdn Bhd
HIGH COURT, MELAKA
CIVIL SUIT NO: 22–34–2011
MOHD FIRUZ JAFFRIL J
14 MARCH 2016
_________________________
[2017] 1 CIDB-CLR 310
The Defendant had appointed the Plaintiff as the contractor to construct a

three storey house at Air Salak, Melaka (“the House”). The House was to be
built on a piece of land belonging to the Roman Catholic Bishop. As the father to
both the director’s of the Defendant already had an existing house on the land,
permission to rebuild the old house was granted by the land owner subject to
certain conditions to be fulfilled by the Defendant. The tender document was
incorporated as part of the agreement. Under the agreement, the construction
sum was agreed at RM798,770. The Plaintiff completed the construction of
the house. By that time, the Defendant had paid a sum of RM1,302,277 to the
Plaintiff, inclusive of variations. Upon the House being completed, the Plaintiff
issued a final statement of account and claimed a sum of RM578,528.69, being
the balance due for work done. The Defendant failed to pay the sum resulting
in the filing of this suit. The House was subsequently declared illegal by the
Melaka High Court in a separate suit for being in contravention of s 70 of the
Street, Drainage and Building Act 1974 (“SDBA”). The House was ordered to
be demolished and was subsequently demolished by Majlis Bandaraya Melaka
Bersejarah (“MBMB”). Hence, the Defendant counterclaimed for the sum of
RM1,429,501.70 being special damages for the loss suffered by the Defendant
as a result of the House being demolished due to the Plaintiff’s act of carrying
out the construction of the house prior without the approval of the relevant
authorities.
Held, dismissing the Plaintiff’s claim and the Defendant’s counterclaim with no
order as to cost:
(1) The word “Government” used in the tender document had to be read
as “employer” for the purposes of the tender exercise to which the
Plaintiff participated, bearing in mind that the tender documents were
a reproduction of the PWD Form 203. The Plaintiff participated in the
tender exercise of the Defendant and was deemed to have notice of the
conditions and provisions of the tender. Clause 11(c) of the contract made
it mandatory for the Plaintiff to comply with all provisions of the law for
purposes of constructing the House. This would include the provisions of
the SDBA.
310
Senga Engineering & Construction Sdn Bhd v
Senga Engineering & Construction
Richwin Holdings (M)Sdn
SdnBhd
Bhdv
(2) Both conditions of the contract and s 70 of SDBA contradicted SP1’s (the
Plaintiff’s director) testimony that he was purely a builder and need not
be concerned whether proposed construction of the House had been
approved by the authorities or not. However, without the approval, there
was no way that the Plaintiff could proceed to erect the house.
(3) SP1 knew that building plan must be approved by the local authority, yet,
he did not make the necessary effort to ensure that it was approved before
embarking on the construction of the House. SP1 even admitted that he
took a risk in carrying out the works without approval. SP1 also admitted
that his reasoning to quickly start work was he would only get payment
when he starts work and that he had asked for the Defendant’s permission
to start as the timeline to complete the House was nine months from the
date of the agreement.
(4) The Defendant too was equally guilty for contravening the provision of
s 70 of SDBA. The Defendant clearly had knowledge that the landlord
had not agreed to the construction of the House. Without the landlord’s
written approval for the Defendant to build the House, the issue of
building plans would be left hanging as the application to MBMB would
have to be endorsed by the landlord. Further, despite receiving a notice
from MBMB, which amongst others instructed the Defendant to stop work
on the House, the Defendant hastened the Plaintiff to complete the House
works, reason being he wanted to move in as quickly as possible.
(5) Thus, both the hands of the Plaintiff and Defendant were tainted. That
being the case, the Court could not render any assistance to either party.
Ex turpi causa non oritur actio - the Court cannot render its assistance to
either party which was part of the illegality.
(6) Owing to the fact that the High Court had declared the House as illegal,
every stage of the building works was carried out illegally. A cause of
action which is founded on an illegal act cannot succeed. Therefore, the
Plaintiff was not entitled to claim payment for the work done. All works
carried out by the Plaintiff were rendered illegal due to contravention of
s 70 read together with s 72 of the SDBA.
(7) The Defendant was equally guilty of flouting the provisions of ss 70 and
72 of the SDBA. Hence, the Defendant was not entitled to the counterclaim
against the Plaintiff. Section 66 of the Contracts Act 1950 was not
applicable in this case. As both parties were equally tainted before the
Court, the losses will simply lay where they fell.
(8) The Defendant was not entitled to a refund of the amount of RM1,302,277
which the Defendant had paid to the Plaintiff. As the Defendant was
equally guilty as the Plaintiff for contravening the provisions of s 70 of the
SDBA, the loss of the Defendant lay where it fell. No Court ought to enforce
311
an illegal contract or allow itself to be made the instrument of enforcing

obligations alleged to arise out of a contract or transaction which is illegal,
if the illegality is duly brought to the notice of the Court, and if the person
invoking the aid of the Court is himself implicated in the illegality.
312
Sri Datai Engineering Sdn Bhd v Daiho Corporation

WRIT SUMMONS NO: 22C–13–02/2015
9 JUNE 2016
_________________________
[2017] 1 CIDB-CLR 313
The Defendant was appointed by the Malaysian Government (“Government”)

for a water channel construction project (“Main Contract”). The Defendant
subsequently appointed the Plaintiff, as its subcontractor for the earthworks
and drainage part of the project (“the Subcontract”). The contract period
was extended from the original completion date owing to adverse physical
conditions (“APC”) and the works were duly completed by this extended
date. Disputes arose between the Government and the Defendant over the
Defendant’s claims and the matter was referred to arbitration. The arbitration
concluded in the Defendant’s favour with an award of a sum of RM36million
for which the additional costs for APC was RM31million together with
interest and costs (“the Award”). The Plaintiff wanted sight of the pleadings
and the Award on “an urgent basis”. The Defendant complied. The Plaintiff
subsequently claimed its share of the Award which amounted to 50% of the
sum total of the figures. Hence, the current suit, which was essentially a claim
for additional costs arising from APC encountered in the course of execution of
the Subcontract works. The defence was that the claim had long been settled;
alternatively, that the claim was time-barred or not sustainable because it was
not in compliance with the notice requirements of the underlying Subcontract.
There was also a counterclaim by the Defendant for overpayment. The four (4)
issues that arose were: (i) whether by receiving payment under Variation Order
No 6 the Plaintiff still had the right to claim for APC under clause 10(2) of the
Subcontract; (ii) whether the Plaintiff’s claim for APC under clause 10(2) was
barred by limitation; (iii) whether the Plaintiff was required to send a notice
to the Defendant pursuant to clause 10(7) of the Subcontract so as to enable
the Plaintiff to make a claim pursuant to clause 10(2) and if answered in the
affirmative, whether the Plaintiff’s failure to send the requisite notice would
bar the Plaintiff in its claim for APC; and (iv) what was a fair and reasonable
proportion of the relevant Award within the meaning of clause 10(2) to be paid
to the Plaintiff?
Held, dismissing both the claim and the counterclaim:
(1) The overwhelming evidence incontrovertibly points to the issuance and

subsequent payment of Variation Order (“VO”) 6 for no other reason save
APC and its attendant problems. The evidence proves that the Plaintiff
had been paid for APC and such payment was effected through VO 6. The
313
Defendant did not receive any other “financial benefit” except payment
for its additional costs incurred due to APC. These additional costs are
also necessarily related to work done and not some other compensation.
This was also consistent with the principles of compensation under s 74
of the Contracts Act 1950.
(2) The Plaintiff did render assistance and information, and that this
assistance and information were used by the Defendant in proving its
claim in arbitration. There was no suggestion anywhere in the pleaded
defence that the Plaintiff was not entitled to its present case because it had
failed to render the information and assistance required at the material
time. In this sense, it may therefore be said that the Plaintiff has effected
its obligations under clause 10(2) of the Subcontract.
(3) The Plaintiff never saw fit to write to the Defendant about its claims
under clause 10(2) of the Subcontract. This silence and lack of pursuit
was in fact consistent with the Defendant’s assertion that the Plaintiff
had actually been fully paid for the costs and additional costs due to APC.
That payment and receipt of payment as well as the Plaintiff’s subsequent
conduct estopped the Plaintiff from making the present claim. There
was also no basis for arguing the existence of a constructive trust. The
relationship between the parties was purely contractual and there was no
evidence of any elements for the establishment of a trust. The argument
was therefore devoid of merit. The Plaintiff did not retain any other right
to claim under clause 10(2) after having been paid VO.
(4) The Plaintiff’s right to sue was not dependent on knowledge. The Plaintiff
must be taken to be fully conversant and aware of its rights and obligations
under the Subcontract and how that Subcontract was to be read with the
Main Contract. It must therefore, be taken to be aware of its rights under
clause 10(2). Time under s 6 of the Limitation Act 1953 started to run
from the date of breach. Since the Award was rendered in 2009 and the
Defendant taken to have received payment around that same time, time
began from the date of the Award. As the claim was filed in February of
2015, the present claim, if there was a valid one to start with, was filed in
time.
(5) Like any other contract, the Subcontract must be read as a whole in order
to construe the parties’ intentions. In the absence of clear express terms
providing for particular events or courses of action, all the clauses in the
Subcontract must be read as cohesively as possible, appreciating that this
was a commercial contract to carry out certain works within a certain
duration. The parties had drawn up this extensive Subcontract to deal
with the various matters that may arise in the course of the execution of
the works.
314
(6) Clause 10(2) had to be read together with clause 10(7). The whole object
of clause 10 was after all, to deal with claims and notices. Where there
was a claim, it was not only logical but fair that the claiming party inform
the other of its intention to make a claim, and to provide the details of the
claim. Claims, especially additional costs claims arising from APC, have
amongst others, monetary implications.
(7) The conditions of the Subcontract have not been met. The Plaintiff failed
to give the requisite notice; the letter relied on by the Plaintiff was not
notice within the meaning of clause 10(7). This failure meant that the
Defendant was not obliged to entertain the Plaintiff’s claim.
(8) The counterclaim was clearly time-barred. The Defendant had made
payments back in 1997. The Defendant had indicated that it was to be
recouped immediately. There was no evidence of whether that was done
through the progress claims. If the Defendant did not do so, and was now
choosing to make its claim, it was long barred by the statute of limitations.
The recovery of payments made in 1997 or thereabouts was clearly time-
barred under the Limitation Act 1953.
315
Tan Kong Han v QDB Ventures Sdn Bhd

ORIGINATING SUMMONS NO: 24C (ARB)–18–04/2015
11 MARCH 2016
_________________________
[2017] 1 CIDB-CLR 316
The Plaintiff had engaged the Defendant to construct his house vide letter
of Award dated 14 December 2009. The parties had used the standard PAM
Agreement and Conditions of Building Contract 2006 (Without Quantities).
The Defendant was supposed to complete the construction of the Plaintiff’s
house by 27 March 2011. The Architect however extended the completion
date to 23 March 2012. The Defendant claimed to have fully completed the
construction of the house on 9 January 2012 whereupon it requested the
Architect to issue a Certificate of Practical Completion (“CPC”). CPC was issued
on 3 April 2012. The Plaintiff disputed this claiming that the Defendant had
instead abandoned the works sometime in May 2012. The Plaintiff commenced
arbitration against the Defendant claiming the Defendant was in breach of
contract by not completing the works and for defective works. The Defendant
on the other hand pleaded that it had completed and handed over the works
on 9 January 2012. The Defendant counterclaimed for outstanding sums
under the Interim Certificates. The Arbitrator made the Final Award to the
sum of RM113,377.06 to the Defendant. The Plaintiff was ordered to pay costs
of the arbitration. The Plaintiff applied under ss 37(1)(b)(ii) and 37(2)(b) as
well as s 42 of the Arbitration Act 2005 (“the Act”) to set aside or to vary the
arbitration award or a part of it. The Plaintiff alleged that the Arbitrator: (i)
had failed to observe the rules of natural justice when she made findings of fact
without first putting the factual allegations to the Plaintiff or to his material
witnesses; (ii) had committed errors of law and in the application of the law;
and (iii) had contravened trite and established principles of law. The Defendant
contended that none of the questions posed were questions of law but were
really questions of fact "dressed up" as questions of law. In relation to s 42 of
the Act, the Plaintiff had framed a list of questions in respect of particular issues
concerning practical completion; damages in relation to defective work; failure
to adjudicate on claim for incomplete works; Progress Payment Certificate No
20; preliminaries and costs.
Held, dismissing the application with no order as to costs:
(1) Sections 37(1)(b)(ii) and 37(2)(b) of the Act do not resolve in the setting
aside of only certain parts of the Award which was what the Plaintiff
sought. On this ground alone, the application had to fail.
316
Tan Kong Han v QDB Ventures Sdn Bhd
(2) The ground(s) relied on by the Plaintiff as supporting the allegation of

breach of natural justice was far too vague; at best, the grounds were
general and evidential in nature. Although a breach of the rules of natural
justice may fall within the concept of public policy, the Plaintiff had
not identified the particular public policy of Malaysia here which was
conflicted.
(3) The public policy ground must be given a narrow and more restrictive
construction and interpretation. The Court should be slow to find for
such a ground or to expand the hitherto accepted and recognized genre
of categories of public policy. The concept of public policy cannot be
vague or generalized but must be identified with clarity and particulars.
Allegations must be sufficiently serious to offend or violate most basic
notions and principles of morality and justice, or where upholding the
award would shock the conscience or is clearly injurious to public good or
wholly offend the ordinary, reasonable and fully informed member of the
public. Strong, compelling evidence must be established. Causative link
between the alleged fraud or corrupt conduct and the award rendered
must be shown. Prejudice must be proved. These tests are stringent. The
intervention of the Court must be slow and the power to set aside, vary or
remit an award must be sparingly exercised and only in the most glaring
of cases.
(4) The arbitration process is meant to be almost exhaustive [save for what is
provided in the Act] and the Award, final and binding. The Courts do not
have appellate jurisdiction save for a very limited instance under s 16 of
the Act, which was not the present case.
(5) No breaches or meaningful breaches of natural justice were made out

by the Plaintiff. There was no case established that the Arbitrator’s
decision of affixing 1 April 2012 as the date when practical completion
was achieved violated the principles of natural justice. The Arbitrator
was required to deal with that very question and she was not restricted
to any date suggested by the parties. The date identified by the learned
Arbitrator was based on evidence before her.
(6) The position was the same even on the issues of the Plaintiff’s claim for
Liquidated and Ascertained Damages (“LAD”), and costs for completion
and for rectifications. There was no breach of the rules of natural justice
of the type and in the manner complained by the Plaintiff.
(7) With respect, as questions posed under s 42, the questions framed were
in effect complaints of errors of findings of fact, findings of mixed fact
and law; and applications of the law to the facts. The questions were not
real genuine questions of law that merited any intervention by the Court,
but were actually complaints more often seen in appeals. The application
therefore fell entirely outside the ambit of s 42.
317
(8) While the Court may have awarded costs differently, that was irrelevant
as such order was entirely within the Arbitrator’s jurisdiction and
discretionary power to make. Unless and until the Plaintiff showed that
the order here was blatantly wrong and unjust, which was not the case,
the orders here should not be disturbed. The Arbitrator had full conduct
of the arbitration and the arbitral proceedings. She would be in the best
position to decide on the factors that will influence the exercise of her
discretion on these matters. The decision of the Arbitrator on costs was
certainly not perverse.
318
Tan Sri Dato’ Prof Dr Lim Kok Wing & Anor v Atsa Architects Sdn Bhd
Tan Sri Dato’ Prof Dr Lim Kok Wing & Anor v

Atsa Architects Sdn Bhd
CIVIL APPEAL NO: 12B (NCVC)–31–04/2015
MOHD FIRUZ BIN JAFFRIL J
26 SEPTEMBER 2016
_________________________
[2017] 1 CIDB-CLR 319
The Plaintiff (Respondent in this appeal) was an architect firm, while the
First Defendant was a director and shareholder of the Second Defendant (the
Appellants in this appeal). By a letter dated 1 August 2007, the Plaintiff was
appointed by the Second Defendant as the project Architect for a bungalow
construction project (“the project”). The Plaintiff’s letter dated 4 June 2008
to the First Defendant proposing a fee percentage and schedule of payment
alongside the Plaintiff’s proposed obligations was not confirmed by either of
the Defendants. The Plaintiff vide letter dated 5 February 2009 brought a claim
based on the projected construction cost. The Second Defendant disputed the
claim but the Plaintiff’s claim for balance of the Architect’s fees was allowed by
the Sessions Court against both the Defendants who were found jointly liable.
The Defendants thus appealed to the High Court. The gist of the Defendant’s
appeal was premised on the ground that the trial Judge erred in fact and in law
on, inter alia, the following issues: (i) the Plaintiff had failed to discharge their
burden of proof in proving that they were entitled to the sum of RM721,730-84
under the purported invoice dated 13 October 2009; and (ii) the fees claimed
by the Plaintiff was calculated based on an Estimated Construction Cost and not
the Final Contract Sum and was therefore excessive and inflated.
Held, allowing the Defendant’s appeal with costs:
(1) It was trite law that a Plaintiff in a suit bore the burden of proving his claim.
Such was the requirement under s 101 of the Evidence Act 1950. The
burden for the Plaintiff to prove his case did not shift to the Defendants.
(2) In the instant case, the evidence adduced by the Plaintiff to prove their
claim of RM721,730.84 was lacking. The invoices on which the Plaintiff
relied to prove their claim was never referred to by the Plaintiff through
its sole witness (PW1) at the trial. The sending out of the invoice and the
contents of the invoice was not a matter agreed upon by both parties. In so
far as the amount of RM721,730.84 was concerned, the parties only agreed
that the Plaintiff had demanded payment for the same amount through
their solicitors letter (i.e. “Letter of Demand”). There was no mention of
the invoice, which the Plaintiff proposed to rely on as mentioned in their
Statement of Claim, in the Letter of Demand. In view of the Defendant’s
319
denial on the invoices, it was incumbent for the Plaintiff to prove that the
invoices were issued to the Defendant. Without the invoices, the Plaintiff’s
case was defective.
(3) The Plaintiff must also adduce evidence that the amount in the invoice as
well as that in the Letter of Demand was the “final construction sum” of
the works (as per the Plaintiff’s letter dated 4th June 2008). No evidence
was adduced to support the Plaintiff’s claim despite the fact that the
house had been completed and the certificate of fitness for occupation
issued. Without the invoices and evidence to support the Plaintiff’s claim
of RM721,730.84, the Plaintiff’s case was flawed with major defects.
(4) As a matter of practice and law, the Final Account of a particular project
was the best way to ascertain the final construction cost of the project.
In the instant appeal, there was no Final Account. No reasons for such
were offered at the trial as the Plaintiff was purely relying on their
letter dated 4th June 2008 and the invoice (which was never adduced
as evidence). Although it was submitted that the reasons for there being
no final accounts i.e. the refusal of the First Defendant to sign the same,
such contention was never pleaded nor raised at the Court below. Upon
perusal of the Final Account it was further found that the so called Final
Account was also not signed by the Plaintiff, Quantity Surveyor and the
Civil & Structural and Mechanical & Electrical Engineer. Hence, the First
Defendant whose signature was last in the list of signatories having to
sign the Final Account could not be faulted for not doing so.
320
Tideway Alliance Sdn Bhd v Daya OCI Sdn Bhd
Tideway Alliance Sdn Bhd v Daya OCI Sdn Bhd

SUIT NO: 22C–3–04/2015
SEE MEE CHUN J
5 FEBRUARY 2016
_________________________
[2017] 1 CIDB-CLR 321
Pursuant to a letter of award (“LOA”) the Plaintiff was appointed by Defendant

as the sub contractor for rock dumping works at the sea designated under the
Defendant’s project for pipeline installation (“the work”). The LOA was issued
based on the Plaintiff’s proposal via its letter dated 25 June 2013 (“proposal
letter”). The Plaintiff was required to provide and mobilize personnel, machinery
and vessel spread for the onshore and off shore rock dumping work for a lump
sum price of RM8.75 million. The Defendant had in turn been appointed by
TLO Offshore S/B (“TLO”) with the ultimate employer being Petronas Carigali
S/B (“PCSB”). The Plaintiff commenced the present claim for the balance sum
for work done amounting to RM6,937,500.00. The Plaintiff had been paid
RM1,872,500.00. The claim was resisted by Defendant alleging a breach of
contract and the Defendant counterclaimed for the cost of completion. The
primary issue for determination was whether the Plaintiff was entitled to the
full payment under LOA and as such to the outstanding balance and whether it
was in breach. The time of completion of work was to be from 5 July 2013 to
20 August 2013. The time of completion was revised to 5 November 2013 for
onshore work and 4 November 2013 for offshore work and then to 3 December
2013 and 29 November 2013 respectively. The close out report for onshore
work showed it to be completed on 15 September 2013. Thus onshore work
had been completed within the revised completion date. The offshore work
had not been completed when Plaintiff left the site in mid February 2014 with
the dispute being whether it was temporary demobilization or abandonment.
Hence insofar as offshore work was concerned there had been a delay by the
time Plaintiff left the site in mid February 2014. The Plaintiff contended that
the delay in commencement of work was caused by the ultimate employer
not approving the vessel proposed by the Plaintiff to carry out the work. The
Plaintiff also had on 12 December 2013 written to the Defendant of “temporary
site demobilization for offshore and onshore due to unfavorable weather and
sea condition during the seasonal North East monsoon periods” and “shall
resume operation until weather condition is permissible for the work expected
between mid February to mid March 2014”.
Held, allowing the Plaintiff’s claim minus the cost of transporter charter of
RM2,001.953.56 and dismissing the Defendant’s counterclaim with costs to
Plaintiff:
321
(1) Although the ultimate employer had the authority to reject vessels and
it was the Plaintiff’s responsibility to procure suitable vessels, this must
be viewed in the context of no issue being raised on the purported delay
especially when offshore work only commenced on 18 October 2013.
(2) The Defendant had supported the Plaintiff’s request for temporary
demobilization. Undoubtedly the weather in late November to mid
December 2013 was bad prompting no offshore work to be done. All
these circumstances coupled with the Defendant’s own letter to TLO
proposing temporary demobilization due to unfavourable weather and
sea condition made the request for temporary demobilization reasonable
as it was based on concrete evidence of bad weather condition. The
Plaintiff was still ready and willing to resume the rock dumping works
when the weather permitted.
(3) There was never any intention of abandonment or repudiation by the

Plaintiff or offer to the Defendant to take over the work as suggested by
the Defendant. There was no absolute refusal by the Plaintiff to perform
the work such that the Defendant could treat itself as discharged. As there
had been no repudiation or abandonment of work by Plaintiff, it did not
lie on the Defendant to assert it was entitled to accept the repudiation and
claim all damages.
(4) The Plaintiff had not breached the LOA as there was no delay on onshore
work and it had not been able to complete offshore work due to the weather.
There had only been temporary demobilization and no abandonment of
work. There had been no termination by the Defendant entitling it to
appoint the third party contractor HSAP Sdn Bhd. The award of the work
to the third party contractor had denied the Plaintiff the balance payment
of the work.
(5) A total of 46m + 26m + 20m = 92m of offshore work had been completed.
This did not constitute 1/3 of offshore work as alleged by the Defendant
and coupled with onshore work being completed, rendered PW4’s (the
Survey Party Chief) assessment of 75% of overall work completed being
probable.
(6) With regard to the charter of LCT Transporter, the Defendant had
chartered the LCT and then sub chartered to the Plaintiff and the charter
fees had been paid by Defendant to the owner. The Plaintiff had difficulties
in paying the charter fees and had requested Defendant to pay for the
charter costs. Given that it was the Plaintiff’s responsibility to secure
the vessel of which the Defendant had sub chartered to the Plaintiff, it
followed that the Plaintiff had to bear the costs of the charter.
322
Tong Yek Construction and Development Sdn Bhd v Bong Lim Fatt & Ors
Tong Yek Construction and Development Sdn Bhd v

Bong Lim Fatt & Ors
HIGH COURT, KUCHING
SUIT NO: KCH–22–172/8–2012
MAIRIN IDANG @ MARTIN JC
2 APRIL 2016
_________________________
[2017] 1 CIDB-CLR 323
Serira Sdn Bhd (“Serira”) entered into a Joint Development Fund Agreement
(“JDF Agreement”) with Sarz Al-Yahya Corporation Sdn Bhd (“Sarz”) for the
development and construction of shophouses (“the said Project”) on certain
land (“the said lands”). The said Project worth RM17million (the Contract sum)
was a private project secured by the Plaintiff for the 1st and 2nd Defendants who
were the partners of Nyan Sin Construction Enterprise Company (“NSCEC”).
Sarz had issued a Letter of Award (“LA”) to NSCEC for the said Project which was
accepted by NSCEC with the signing of a Contract Document between Serira and
Sarz Joint-Venture and NSCEC (“the said Contract”). On 19 March 2010, a Deed
was signed between the Plaintiff and the First and Second Defendants which
identified their scope of responsibilities and their rights (“the Deed”). The
problem started when Sarz failed to settle 2 payments certificates amounting
to RM1,208,457.08 which was submitted by NSCEC for payment for works done
on the said Project. NSCEC then filed a suit against Sarz and Serira under Suit
No KCH–22–24–2011 (“Suit 2011”). A settlement between NSCEC and Serira
was reached with the signing of a Deed of Settlement dated 11 February 2011
(“DOS”). Another Agreement between Serira and NSCEC was signed on the same
date (“Serira-NSCEC Agreement”). There was also a suit between Serira and
Sarz in Suit KCH–22–248–2010–II (“Suit 2010”) wherein it was declared that
the JDF Agreement had been terminated (“the Order”). On 22 June 2011, the
3rd Defendant Nyan Sin Construction Enterprise Sdn Bhd (“NSCESB”) entered
into an agreement with Serira to continue the said Project (“the Serira-NSCESB
Agreement”). The Plaintiff commenced the present suit against the Defendants
claiming, inter alia, a sum of RM4,500,000.00. The First and Second defendants
counterclaimed for the following orders: (i) a declaration that the Deed was void
for the lack or failure of consideration; (ii) a declaration that the Deed had been
frustrated by virtue of the Order made in Suit 2010; (iii) a declaration that the
Deed had been terminated by the Plaintiff’s repudiation; and (iv) a declaration
that the Deed was illegal and void and unenforceable. The issues arising for
determination were: (a) whether there was a valid and enforceable contract
existing between Tong Yek Constructions and Development Sdn Bhd and Nyan
Sin Construction Enterprise Company/First and Second Defendants by virtue
of the Deed; (b) whether the Deed was void for lack or failure of consideration;
and (c) whether the Deed was illegal and/or void and unenforceable. The
Defendants contended that the Deed was illegal and void by virtue of ss 2(g),
323
24 and 26 of the Contracts Act 1950 (“the Act”) as its consideration and object
was immoral and opposed to public policy since the said Deed was in form and
in substance an agreement to make huge commission. It was also contended
that the consideration for the Deed had failed because the First and Second
Defendants were unable to complete the Project and be paid of the contract
sum of RM17 million.
Held, allowing the Plaintiff’s claim with costs and dismissing the Defendants
counterclaim:
(1) The Plaintiff had duly performed all its parts under the said Deed and
had successfully secured the Project valued RM17million in and under
the name of NSCEC. In pursuance of the Deed and through the hard work,
effort and assistance of the Plaintiff, a LA was issued by Sarz which was
duly accepted by the First and Second Defendants/NSCEC followed by the
execution of the said Contract.
(2) The First and Second Defendants raised the “method employed by the
Plaintiff as ‘middleman or go-between’ without doing any real work
which had the effect of inflating the property prices in the community
and against government’s policy”. This on the face of it would fall squarely
under s 24(e) of the Act. However, the so called “method employed” was
not described nor particularised in the amended defence. It was also not
stated in the amended defence how the inflated price of the said Project
would have the effect of inflating the property price in the community.
There was also no evidence led by the Defendants on this so called
“method employed” and “which had the effect of inflating the property
price.” The parties were bound by their pleaded case.
(3) The Deed was not void. From the evidence it was not plain and obvious
that the consideration was unlawful or illegal as being immoral or
opposed to public policy. Moreover the said Project was a private project
which was initially offered to the Plaintiff but it instead invited NSCEC
to participate. It was like a smart relationship where the Plaintiff got the
Project for the NSCEC and then they agreed to their respective entitlement
of the Contract sum. The evidence did not support that the said Deed is
to be condemned under s 24(e) of the Act as being against the Malaysian
Public Policy.
(4) The Plaintiff and the First and Second Defendants had opened a joint
account at HSBC Bank Bhd Kuching Branch (“HSBC Joint Account”). Yet
no payments received by NSCEC for the said Project had been banked into
the HSBC Joint Account. There was also no distribution of the Plaintiff’s
entitlement of the payments made for the said Project. The First and
Second Defendants/NSCEC had not informed the Plaintiff of any dispute
or difference it may have with SARZ immediately upon the happening
thereof and this included using the Third Defendant to complete the said
324
Tong Yek Construction and Development Sdn Bhd v Bong Lim Fatt & Ors
Project. The First and Second Defendants/NSCEC were clearly in breach

of the said Deed.
(5) It was clear that despite the Order and Serira having taken over the said
Project, the rights of the First and Second Defendants/NSCEC were not
affected nor compromised at all. The pre-conduct and post-conduct of the
First and Second Defendants/NSCEC with Serira showed clear intention
that the said Project was to proceed as per the LA and the said Contract.
It was also very clear from the evidence that Serira had every intention to
honour the LA that was issued by Sarz to NSCEC and the Contract signed
between Sarz and the First and Second Defendants/NSCEC. Therefore
to accede to the Defendants’ assertion that the said Order had the
effect of determining the rights of the Plaintiff and the First and Second
Defendants/NSCEC in respect of the said Project would be an affront to
justice.
(6) The Plaintiff was entitled to receive the agreed portion (24.47%) due to it
as per the said Deed but not the full amount of RM4.5million. The Plaintiff
acknowledged that the Contract sum for the said Project was reduced.
The Plaintiff was therefore amenable to a reduced sum of its entitlement
based on the reduced Contract sum.
(7) The said Deed continued to be binding as between the Plaintiff and the
First and Second Defendants/NSCEC. There was no breach on the part
of the Plaintiff. The said Deed had not been terminated by the parties
thereto.
325
328

4.CIDB Construction Law Report 2016 PDF

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

4.CIDB Construction Law Report 2016 PDF

Caricato da

Copyright:

Formati disponibili

Construction Industry Development Board Malaysia

10th Floor, Menara Dato’ Onn, Putra World Trade Centre,

© Construction Industry Development Board Malaysia

No copyright is claimed as to any part of the original work prepared by a

Any views or opinions presented in this publication are solely those of

Published by ARK Knowledge Solutions

ISBN No: 978-967-14277-3-6

Printed in Malaysia by Percetakan Jiwabaru Sdn Bhd

Prof. Sr Dr. Wan Maimun Wan Abdullah

A Mu’iz Abdul Razak

Hj. Abdul Razak Husin

Ar. Alvin Lim

Chung Soo Kiong

Datin Grace Xavier

Ir. Lai Sze Ching

Sr Lim Kok Sang

Sr Nazir Muhamad Nor

Sr Dr. Noushad Ali Naseem Ameer Ali

Ir. Oon Chee Kheng

Ir. Prem Kumar

A Mu’iz Abdul Razak Sr Loo Ming Chee

Sr Amran Mohd Majid Nick Powell

Aniz Ahmad Amirudin Sr Dr. Noushad Ali Naseem Ameer Ali

Chan Yew Hoong Sr Ong Hock Tek

Sr Lim Kok Sang

The invaluable assistance rendered by the following

Sr Sariah Abd Karib

Sr Mohd Zaid Zakaria

Sr Nazir Muhamad Nor

The Construction Industry Development Board (CIDB) in its pursuit to support

This publication represents an on-going key initiative addressing Quality,

All efforts to achieve a comprehensive, accurate and up-to-date publication

We express gratitude to the technical committee specifically appointed to guide

Volume of Projects for 2015 & 2016 by States

Number of Projects for 2015 & 2016 by States

Source: CIDB Malaysia

Project Volume and Value (RM billion) for 2016 by Sector

Source: CIDB Malaysia

billion. Overall an upswing trend is seen in 2016 similar to 2014.

Project Volume for 2016 by Category

Source: CIDB Malaysia

Statistics on Construction Cases at Federal Court for 2016

Source: Malaysian Judiciary

Statistics on Construction Cases at Court of Appeal for 2016

Source: Malaysian Judiciary

Statistics on Construction Cases at High Court for 2016 by States

Source: Malaysian Judiciary

Construction High Court

Statistics on Construction Cases at Construction High Court

Source: Malaysian Judiciary

Statistics on Construction Cases at High Court, Shah Alam,

Statistics on Construction Cases at High Court, Kuala Lumpur,

Source: Malaysian Judiciary

Statistics on Construction Cases at Sessions Court for 2016 by

Source: Malaysian Judiciary

Statistics on Construction Cases at Magistrates Court for 2016 by

Source: Malaysian Judiciary

An Overview: Malaysian Courts

Statistics on Construction Cases at Malaysian Courts for 2016

Number of Cases Registered

High Court: 581

Source: Malaysian Judiciary

Number of Cases Disposed