Brunsfield Construction Sdn Bhd v Lde Aluminium Industries Sdn Bhd (P-02(W)-782-04/2018)

This is an appeal against certain parts of the decision of the High Court rendered on 16.3.2018. At the High Court, the respondent’s claim was allowed with interest at the rate of 8% per annum after the High Court had acknowledged and found that the appellant was entitled to deduct a total sum of RM1,059,491.59 in respect of 16 debit notes issued by the appellant for purchase of materials and back-charges for costs incurred on behalf of the respondent. There is no appeal on the appellant’s deductions; the appeal only concerns the High Court’s decision to allow the respondent’s claim.

After hearing learned counsel and upon careful consideration of the submissions against the records of appeal and the applicable law, we unanimously allowed the appeal. These are our reasons.

The appellant was the main contractor in a project known as the “Construction of Main Hospital Building and External Works for the Design, Construction, Equipping, Commissioning and Maintenance of Alor Setar Hospital, Kedah Darul Aman” (“the Project”). The Project was awarded by 3 the Government of Malaysia to a company known as MH Projects Sdn Bhd who in turn awarded the Project to the appellant.

By Letter of Award dated 21.4.2004, the appellant awarded certain subcontract works to the respondent, namely to “Supply and Install of Ceiling Work” for the sum of RM3,542,000.00. Vide Letter of Confirmation of Variation Order Work No. 1 dated 21.5.2004, the respondent was also required to carry out certain variation works, that is, “Supply and Install SG Mirror & Aluminium Door Frame Infilled with Timber to Toilet Cubicle” for a sum of RM315,491.23. Both the Letter of Award and the Letter of Confirmation of Variation Order Work No. 1 form the underlying contract between the disputing parties.

The Project was completed on 28.2.2007 and a Certificate of Completion was issued on 14.3.2007. The defects liability period of 24 months ran from 28.2.2007 to 27.2.2009. The respondent claimed that it had completed all works including the variation works within the stipulated extended time frame and that its works were in accordance with the standard and quality required.

Now, the original date of completion was actually 30.7.2004. As we can see, this date of completion was extended to some three years later. The reasons behind the extension(s) are of no particular relevance in this appeal save to acknowledge that such extensions took place as nothing turns of it. Similarly, the matter of the quality of the respondent’s works and whether defects in such works were duly rectified are also of no particular 4 relevance because of the narrow compass of issues canvassed in the instant appeal.

What is of concern in this appeal is the respondent’s claim for payment of balance monies due for work done or completed which was allowed by the High Court on account that it was proved. The respondent claimed that it had issued 27 progress claims in the course of the works for which it had been paid only up to the 26th progress claim. Its last progress claim, Progress Claim No. 27 dated 8.4.2006 [PC 27] was for the sum of RM3,912,990.28. According to the respondent, accepting that the appellant had, at the request of the respondent, purchased materials for the respondent totaling RM958,306.40, there was still a sum of RM2,954,683.88 due from the appellant. Since the appellant had paid the respondent only a total sum of RM2,081,201.04, there is still a balance sum of RM873,482.84 due from the appellant. The respondent’s claim at the High Court was for that sum. The respondent tendered PC 27 [exhibit P2] as evidence of its work and claim.

In defence, the appellant contended that, as per the terms and conditions of the Letter of Award and the Letter of Confirmation of Variation Order Work No. 1, the quantity and value of the subcontract works and the variation orders are only provisional and subject to joint measurement on site upon the respondent’s submission of progress claims for work done. Representatives of the contracting parties would attend these joint site measurements in order to measure the actual quantity of work done. Payment to the respondent is then made upon verification and certification after such joint site measurements. 5

The appellant contended that the progress claims including PC 27 submitted by the respondent for payment do not reflect or are insufficient to prove the actual amount and value of the total work done by the respondent. As explained, the joint site measurements that are provided in the Letter of Award is to cater specifically for that concern.

It was the contention of the appellant that PC 27 is a unilateral and uncertified claim for which relevant and related documentation, required under the terms and conditions of the Letter of Award must also be produced to support the claim in PC 27, were not submitted together with the claim. Since none was produced, the appellant contended that the respondent must be bound by the Final Account that the appellant had issued. The Final Account was produced at trial and marked as exhibit D50.

In that Final Account, after taking into account the measurements on site as done by the appellant and after deducting for purchase of materials and back-charges, the amount due to the respondent is a sum of RM55,115.00. It seems the respondent had requested the appellant to purchase the materials for the subcontract works on its behalf as it had financial difficulties at the material time. The back-charges were incurred by reason of rectification or repair works, replacement of defective or damaged materials, rental of equipment, general maintenance of the site during rectification or repair works arising from or caused by the respondent. Debit notes were raised at the material time to cover for these purchases and back-charges. A cheque for RM55,115.00 was sent to the respondent through the appellant’s solicitors. It was, however, rejected and returned. 6

The learned Judge found the respondent’s claim proved after having “done a close and careful examination of all the evidence presented”; disagreeing with the appellant that the uncertified PC 27 cannot be accepted as proof of the respondent’s claim. The learned Judge found that the appellant’s failure to plead non-receipt of PC 27, to reply to the respondent’s letter dated 2.3.2007 attaching a Summary of Progress Claims and Payment Received, and to dispute or complain about PC 27; or even call for a joint valuation; choosing instead to remain silent and not protest, and deliberately by conduct ignored the exhibit P31, “To me, the Defendant have acted to their detriment. By failing to [sic] response, the Defendant could be [sic] assume to have accepted or agreed to the amount or quality of the work done by the Plaintiff as reflected in the said Progress Claim No. 27.”

The learned Judge found that the appellant was “stop from questioning the said Progress Claim. I registered my surprise at the conduct of the Defendant’s for not taking steps to dispute the content of the letter by the plaintiff namely P31 …It is reasonable to expect a prompt or vigorous denial but there was no response whatsoever from the Defendant…I wish to make it clear that I am prepared to say that silence upon receipt of exhibit P31 should be [sic] construe and treated as an admission of the contents of the said exhibit. P31 stand unrebutted as the Defendant did not filed any letter to counter P3.”

In the light of those facts, the learned Judge found the respondent’s “Final Account” remained undisputed and that its “Interim certificate Progress Claim No. 27 (merely estimate and are not final) which was submitted to the 7 [sic] Defendant’s can be considered as the final amount payable after due regard to all the circumstances of the case.” In short, the learned Judge applied the principle of estoppel to prevent the appellant from contesting the validity and role of PC 27, that because the appellant did not plead non-receipt of PC 27, it could not now raise it at the trial; that because it did not respond or dispute PC 27 at the material time, it must be taken to have accepted it and is now estopped from contesting PC 27.

With respect, we disagree. While justice is always the overriding consideration, doing justice requires every Court to examine evidence presented, deliberate on the arguments made and apply the relevant legal principles to the facts. It cannot be a case of accepting the contents without more, citing the principle of estoppel, as was done by the learned Judge.

It is the duty of the trial Court to evaluate evidence led, in particular, consider the oral testimonies against any documentary evidence produced by either party; give proper weightage to all evidence, and explain why certain pieces are discarded or have overall bearing and value. It is not enough to say that there has been a close and careful examination of all the evidence presented but offer no explanation or reasoning on that evaluation save to deal with the issues for determination from just a point of pleading.

Even in that regard, we find that the learned Judge had in fact misapprehended the issue that was raised by the appellant.

In considering the issue of whether the respondent had proved its claim and was entitled to payment for work done, it was incumbent on the trial 8 judge to take into consideration the defence to the claim. The appellant’s defence or case was not so much that it did not receive PC 27 but that there was a prescribed procedure under the terms and conditions of the underlying contract for valuation and payment of work done; that that procedure had prevailed and had been adhered to throughout the duration and progress of the works; that the respondent’s works prior to the impugned PC 27 had always been valued and certified before payment; and that the certified payments made by the appellant had been received by the respondent without protest. This is all clearly pleaded in the Defence. In any event, the respondent’s pleas that it had submitted 27 progress claims (see paragraph 5 of the Amended Statement of Claim) is in fact denied by the appellant (see paragraph 4 of the Re-Amended Defence).

This material defence was not considered at all by the learned Judge. We have had a look at the relevant terms of the underlying contract between the parties, which examination surely was an exercise that must necessarily be undertaken in order to determine the issue of whether the respondent was entitled to payment for PC 27. Unfortunately, we do not find this done at all by the learned Judge.

We have also taken on board the testimonies of the witnesses called at trial; again, an exercise that does not appear to have been undertaken by the learned Judge at all. While it is not for the appellate Court to be making findings of fact, as that is the function of the trial Court, that exercise needs to be undertaken where there is a failure to do so in the first place. The appellate Court has to decide whether the decision of the trial Court is still 9 sustainable in the face and against the weight of the evidence produced but not evaluated, or not evaluated properly by the Court of first instance.

Having done all that, this is what we found.

Now, the underlying contract between the parties is to be found in the Letter of Award dated 21.4.2004. Proper and due regard must be accorded to the terms and conditions of this contract when determining the claim and defences raised. At the end of the day, the respondent’s claim for balance due for work done is still a contractual claim arising from the respondent’s performance of the subcontracted works and variation works as found in the Letter of Award and the Letter of Confirmation.

The value of those subcontract works is not on a fixed or lump sum basis; rather it is provisional. In respect of the subcontract works and the formalized variation work, the provisional sums were RM3,542,000.00 and RM315,491.23 respectively. It is provisional in that the sums will be “adjusted for any work done certified for the period…” and that the value in the Letter of Award would not reflect the final value of the actual work done. The payment of the sums due to the respondent is also upon certification by the appellant – see item (g) in the Letter of Award.

For the purpose of this appeal, the relevant provisions of the Letter of Award are clauses 13, 14 and 17.

Clause 13 contains a specific procedure to be followed when it comes to progress claims. Under clause 13.2, there is provision for joint site 10 valuation where in the event the respondent “fail to be present for the joint site inspection, the valuation conducted by us shall be deemed final.”

Clauses 4.14 and 17.3 of the Letter of Award read as follows:

Submission of Documents

4.1 The Total Sub-Contractor is required to submit promptly to us the following:

4.11 A site organization …

4.12 All the necessary samples…

4.13 Shop Drawings and Method Statements to be approved …

4.14 Seven (7) copies of the As-built Drawings, seven (7) copies of the Operating Manual, seven (7) copies of the Maintenance Manual and seven (7) copes of the Warranty Letter upon completion of your scope of work.

Variations

17.1 You shall make such variation …

17.2 All quotations for variation …

17.3 Submission of additional work claims must be supported by a complete set of measurements and other necessary documents such as AI, EI, Contract drawings, As-built drawings, Certified day work sheet, quotation, cost break-down, certification of work done by our authorized representative and etc. [27] Several key points were made by the appellant on the reading and construction of the Letter of Award, in particular on clause 13.2, valuation of progress claims and the preparation of the Final Account. 11 [28] First, the witnesses called by both parties testified that there were valuations of the progress claims submitted because the claims were provisional and the final amount payable was subject to change during the final joint site measurement where the actual work done and materials supplied would be physically ascertained on site. See testimonies of SP 1, SP 2 and SP 3, that the amounts mentioned in the Letter of Award are only provisional and subject to measurement on site. Thus, the value and actual work done by the respondent was still a matter of measurement ascertained at site through the conduct of joint measurements. [29] Second, the total sum of RM2,081,897.92 that was paid for Progress Claims Nos. 1 to 26 were all in accordance with this agreed procedure. [30] Third, that despite being notified orally, as was the practice at site, the respondent failed to attend some of these valuation inspections. At the trial, there was evidence produced showing that a total of 24 site valuations were conducted for the 26 Progress Claims received by the appellant. Of these, 16 were undertaken jointly by both parties whereas 8 were undertaken in the absence of the respondent. [31] Neither of these key points nor even the terms and conditions of the Letter of Award were considered by the learned Judge. Had that been undertaken, the learned Judge would have found, as we have, that the respondent’s case was not proved, even on a balance of probabilities. [32] In relation to the Final Account, the respondent has questioned its authenticity, suggesting that it was created only after the respondent’s claim 12 was filed on 16.11.2010; that it surfaced 4 years after the works had been completed and PC 27 had been submitted. It was suggested that it was therefore not a contemporaneous document, unlike PC 27, and that as a unilateral document created after the respondent’s claim was filed, has no probative value, was totally unreliable and was rightly disregarded by the learned Judge. The Final Account is referred to as Certificate 25 dated 4.1.2011 in the respondent’s submissions. [33] The learned Judge had agreed with the respondent and had found that because the appellant had not responded at the material time to PC 27 and also to the respondent’s letter dated 2.3.2007 [exhibit P31] that the appellant was estopped from challenging the respondent’s claim. [34] Once again, with respect, we must disagree with the learned Judge. The respondent’s line of submission is unsustainable given the following. In terms of chronological sequence, the parties had in fact embarked on a joint site measurement for the purpose of measuring the actual value and quantity of the respondent’s final works prior to the respondent’s letter of 4.1.2007. This exercise of conducting joint site measurement and preparing the Final Account actually took place on 30.8.2006. [35] This Final Account prepared by SD6 was carried out according to the agreed terms and conditions of the Letter of Award. For the purpose of preparing a Final Account, a final valuation had to be conducted and evidence was led to show that this was started on 30.8.2006. The appellant’s representative, Kelvin Lim Chin Kooi [SD6] and the respondent’s representative, Zahirrudin bin Zainal Abidin [Zahir] took part in this exercise; 13 this is evidenced by their signed working sheets prepared for this purpose – see pages 2296 to 2304 of the Record of Appeal and exhibit D52. [36] Zahir, however, did not subsequently attend and complete that final joint site measurement. SD6 testified that Zahir had told him that the respondent’s management did not want Zahir to proceed with the final joint site measurement process. So, SD6 went ahead with and completed on his own, the final joint site measurement. SD6 then went on to prepare the Final Account [exhibit D50] in 2008, based on this measurement. [37] In such circumstances, clause 13.2 of the letter of award entitles the appellant to conduct a unilateral site inspection leading to its certification of the relevant progress claim; and that the valuation so conducted is agreed “shall be deemed final”. This then renders the respondent’s PC 27 questionable and lacking in credibility. [38] As for the contents of the Final Account [exhibit D50], it must therefore be treated as the only evidence of the actual work done and materials installed on site. According to the Final Account, the total work done by the respondent, that is, for the supply of labour, material, machinery and tools for the complete installation of the following works in accordance with specification of main contract and subject to the satisfaction of Jabatan Kerja Raya, was in the sum of RM2,968,025.28. As for the total work done for the Variation Orders, the appellant had certified that the amount payable to the respondent was in the sum of RM228,479.23. The appellant had provided the breakdown of the actual work done and materials installed on site in respect of the respondent’s subcontract works and the variation orders 14 together with the requisite as-built drawings – see pages 2221 to 2291 of the Record of Appeal Vol. 2/11. [39] Further, the Final Account states that only a sum of RM55,115.00 is due to the respondent. This sum was arrived at after taking into account the appellant’s purchase of materials for the respondent and which were reflected in the debit notes tendered at trial. Those debit notes were accepted by the learned Judge and there is no appeal by the respondent on this aspect. [40] SD6 had testified that the Final Account was sent to the respondent for signing. Zahir refused to sign the Final Account. In 2009, when SD6 followed up with the respondent’s signing of the Final Account, he was asked by the respondent to email the same. The emails dated 11.1.2010,

13.1.2010 and 8.9.2010 forwarding the Final Account to the respondent’s main witness, Eddie Leong [SP1] were tendered in evidence. The respondent did not respond. Another email for the same purpose was also sent to one Angeline at the respondent’s office. It, too, went unanswered. The existence of Angeline was confirmed by SP 1 as one of the respondent’s staff at the material time. She was not called to testify. [41] All this goes to show that the Final Account or Certificate 25, though dated 4.1.2011, after the respondent’s claim was filed, was in fact prepared and in existence long before the claim was actually filed. [42] This whole factual matrix as testified by the appellant, corroborated with by contemporaneous documentary evidence was not at all considered 15 by the learned Judge. Such evidence was both material and relevant to the determination of the respondent’s claim; and we are in full agreement with the appellant that this error of the learned Judge has rendered it necessary for this Court to intervene. [43] We have in any event, taken the trouble to examine PC 27 – exhibit P2. Having examined PC 27 dated 8.4.2006, we do not find it to hold any or any of the weight that was accredited to it by the learned Judge. This is what is in PC 27: Dear Sir, PROJECT: CONSTRUCTION OF MAIN HOSPITAL BUILDING AND EXTERNAL WORKS FOR THE DESIGN, CONSTRUCTION, EQUIPPING, COMMISSIONING AND MAINTENANCE OF ALOR SETAR HOSPITAL, KEDAH DARUL AMAN (660 BEDS) -27th Progress Claim – Final We refer to the above project and wish to apply for our progress payment as the following: ORIGINAL CONTRACT VALUE: 3,542,000.00

0.00 REVISED CONTRACT VALUE: 3,418,155.60 TOTAL VALUE OF WORKDONE (Refer to Appendix A) 3,418,155.60 VARIATION ORDER 494,834.68 MATERIAL ON SITE - Less: 5% RETENTION SUM 195,649.51 3,717,340.77 Less: MATERIAL SUPPLY BY YOU 958,306.40 Less: PROGRESS PAYMENTS RECEIVED (Payment No. 1-22) 1,968,372.23 BALANCE DUE TO US 790,662.14 16 [44] It is obvious from the above that PC 27 is a mere summary of the subcontract works and variation works, with no supporting documents attached; as is typically seen in the other 26 progress claims submitted by the respondent. The respondent is obliged under clauses 4.14 and 17.3 of the letter of award to submit together with the progress claim, relevant supporting documents for the consideration of the appellant. [45] The filing of a claim to enforce its rights does not absolve the respondent from having to comply with the terms and conditions of the Letter of Award. The respondent is still obliged to show that its claim is within the agreed terms; it is never the function of the Court to rewrite terms and conditions of contract. To be successful, the respondent must bring itself within the terms of the Letter of Award, show compliance and proof of work done. Tendering PC 27, without more, in our respectful view, is far from being sufficient for that purpose; and this was not properly considered by the trial judge. [46] Bearing in mind that PC 27 is the respondent’s final claim, there is still the matter of joint site measurement to measure the value and quantity of the respondent’s actual works. No evidence was adduced by the respondent that it had requested for such measurement, and that the same had been refused. Or, that the respondent had itself conducted a measurement on site and PC 27 reflects the records taken at such measurement. We, therefore agree with the appellant that the respondent was always obliged to show that its claim is within the four corners of the Letter of Award. 17 [47] Further, the respondent as claimant, bears the burden of proving each and every item in PC 27. More so where the actual quantity and value of works have not been inspected and measured on site under the terms of the underlying contract between the parties. Authorities to this effect may be found in the cases of Aneka Melor Sdn Bhd v Serisabco Sdn Bhd [2016] 2 CLJ 563, Dekon Sdn Bhd v Pembinaan Asas Klasik [2017] 1 LNS 888, and Hasrat Idaman Sdn Bhd v Mersing Construction Sdn Bhd [2015] 11 MLJ 464. [48] In any case, PC 27 states that it is a sum of RM790,662.14 that is due to the respondent, and not the amount of RM873,482.84 awarded. As the single piece of evidence upon which the claim is pivoted, we should be able to find the sum claimed readily stated in that PC 27 too. It is not. Yet, it is the very basis upon which the learned Judge had allowed the respondent’s claim. It is only through further mathematical calculations that the sum of RM873,482.84 was awarded; there were further sums which had not been paid under the certified progress claims 1 to 26 and it is the inclusion of those sums that caused the amount awarded to be the sum of RM873,482.84, and not RM790,662.14, as stated in PC 27. [49] We therefore agree with the appellant that the learned Judge fell into error in invoking the principle of estoppel and using PC 27 as the proof of actual work and material supplied on site. The respondent was required to prove the detailed makeup of PC 27. Having examined PC 27, it is not a speaking document capable of the construction and purpose given by the learned Judge. 18 [50] Finally, on the matter of interest. The learned Judge had awarded interest at the rate of 8% per annum from 30.1.2008 to the date of realization or full settlement. This rate is contrary to the rate fixed under Practice Direction No. 1 of 2012, that is, the rate of 5%. [51] For all the foregoing reasons, there are obvious merits in this appeal. The learned Judge was plainly in error in his application of the principle of estoppel and in the evaluation of the evidence before him. The decision reached was further not supported by the documentary evidence adduced. We therefore find sufficient merit in the appeal to warrant appellate intervention. The appeal is therefore allowed with costs and the decision of the High Court is set aside and the respondent’s claim stands dismissed. Dated: 19th Jun 2019 (MARY LIM THIAM SUAN) Judge Court of Appeal Malaysia 19 Counsel/Solicitors For the appellant: Abdul Rashid bin Ismail (Azreen binti Ahmad Rastom with him) Tetuan Rashid Zulkifli D2-5-5, Block D, Solaris Dutamas No. 1, Jalan Dutamas 1 50480 Kuala Lumpur For the respondent: Michael Khoo (Lim Hock Siang with him) Tetuan Sunny Khoo & Company 2D-1-2, Medan Angsana Satu