Elite Alliance Engineering Sdn Bhd v Visi Nusajaya Sdn Bhd (WA-12AC-24-05/2021 & WA-A52C-65-12/2020)

This is an appeal against the decision of the Sessions Court in refusing to grant summary judgment in respect of release of retention monies pursuant to a construction sub-sub contract.

The Appellant/Plaintiff is a private limited company involved in pipe jacking work business.

The Respondent/Defendant is also a private limited company involved in specialised civil and engineering construction business.

The Government of Malaysia appointed Pembinaan SPK Sdn Bhd as the design and build contractor to carry out and complete the works at Pakej D-54 – Cadangan Pembinaan Rangkaian Paip Pembentungan bagi Upper Kerayong, Selangor (Reka dan Bina) (No. Kontrak KeTTHA/JPP/D54/GKL/NR/14/K4)(“Project”). 3

The Respondent was appointed by Pembinaan SPK Sdn Bhd as its sub-contractor to carry out a portion of the Project works.

By a letter of award dated 7 March 2017 (Sub-Sub Contact”), the Respondent appointed the Appellant as its sub-contractor to carry out the pipe jacking works of the Respondent’s portion of the Project works.

The material terms of the Sub-Sub Contract wherein the Appellant and Respondent are names as Subcontractor and Main Contractor respectively are as follows:

Retention All payment made to the Subcontractor under Clause 20 above shall be subject to retention as per Appendix C. Upon completion and successful handing over the Subcontract Works by the Subcontractor, the first half moiety shall be released interest free and the balance shall also be released interest free twenty four (24) months thereafter, always subject to period of honouring payment provided under Appendix C or upon the issuance of the release of the said sum from the Employer to the Main Contractor, whichever is later.

Defects Liability Period The Subcontract is subject to a “Defects Liability period (DLP)” which shall commence immediately upon the issuance of the “Certificate of Practical Completion (CPC)” by the Main Contractor and practical completion of the Subcontract Works and the expiry of the defects liability period of the Subcontract which is as per Appendix C. The Subcontractor shall at its own costs and expenses rectify and make good all defects, damages, shrinkages and faults in the Subcontract Works which appears during this period according to the Main Contractor’s instruction. 4 [8] In Appendix C, the period of honouring payment and defect liability period are stated as 30 days and 24 months respectively. [9] According to the Appellant, it has completed its works under the Sub-Sub Contract on 5 January 2018 and approved by the Respondent on 6 January 2018 as evidenced by the joint measurement sheet of completed work reproduced below: 5 [10] By the failure of the Respondent to thereafter issue its certificate of practical completion, the Appellant by letter dated 2 April 2018 wrote to the Respondent to request for the issuance of the certificate of practical completion. 6 [11] However, the Respondent failed, refused and/or neglected to do so. In addition, the Respondent did not remit to the Appellant both the first moiety as well as second moiety of the retention money despite written reminders from the Appellant dated 6 July 2020, 16 July 2020 and 15 September 2020. [12] Finally, the Appellant via its solicitor’s letter dated 7 October 2020 demanded from the Respondent for the release of the whole retention sum amounting to RM145,614.98. [13] The Respondent ignored the Appellant’s solicitor’s demand and relied on its written response dated 9 July 2020 to the Appellant stating the retention money would only be released upon the issuance of the release of the said sum from the employer to the main contractor as per clause 21 of the Sub-Sub Contract. [14] As the result, the Appellant on 7 December 2020 commenced its writ action in the Sessions Court and thereafter on 27 January 2021 filed its summary judgment application (“Application”) praying as follows:

Jumlah sebanyak RM145,614.98 iaitu Wang Pengekalan yang terhutang dan perlu dibayar di bawah Surat Awad tersebut;

(ii) Faedah pada kadar 5% setahun ke atas jumlah yang diberikan oleh Mahkamah yang Mulia ini dalam perenggan (a) di atas dari tarikh pemfailan tindakan ini, 7.12. 2020 sehingga tarikh pembayaran penuh;

(iii) Kos; dan 7

(iv) Relif-relif dan lanjut yang difikirkan patut dan sesuai oleh Mahkamah yang Mulia ini. [15] The affidavits which were filed for purposes of the Application as follows:

Appellant’s affidavit in support affirmed by Dennis Nga Diong Hin dated 27 January 2021;

(ii) Respondent’s affidavit in reply affirmed by Logamurthy a/l Murugiah dated 19 February 2021; and

(iii) Appellant’s affidavit in reply affirmed by Dennis Nga Diong Hin dated 5 March 2021. [16] The Sessions Court heard the Application but dismissed the same on 5 May 2021 with costs in the cause. [17] The Appellant was dissatisfied with the decision and has on 18 May 2021 filed its appeal to the High Court. [18] The appeal was fixed before me for hearing on 6 and 22 September

After having read the written submissions of the parties and oral arguments of counsel, I allowed the appeal with costs of RM5,000.00 subject to the usual allocator. I also directed that judgment be accordingly be entered in the Sessions Court. 8 [19] I now furnish below the grounds of my decision. Contentions and Findings [20] The Appellant principally contended that it has completed the pipe-jacking works under the Sub-Sub Contract and handed the same over to the Respondent on 5 January 2018 which has been duly endorsed by the Respondent. Since then, more than 24 months had elapsed. The Appellant has thus complied with clause 21 of the Sub-Sub Contract and both moieties of the retention must therefore be released and paid by the Respondent. [21] The Respondent in opposition rebutted that the Appellant’s claim is premature in that there is no certificate of practical completion issued by Pembinaan SPK Sdn Bhd because the testing and commissioning of the pipeline has yet to be tested by Indah Water Konsortium. The Respondent out that the adjudicator took the same view in the adjudication proceedings under the Construction Industry Payment and Adjudication Act 2012 (“CIPAA”). In addition, the Respondent also relied on clause 21 of the Sub-Sub Contract that the whole retention sum has to date not been released by Pembinaan SPK Sdn Bhd to the Respondent. [22] First and foremost, this is an appeal on a non-trial decision from the Sessions Court. The appeal is hence by way of re-hearing afresh following Order 55 Rule 2 of the Rules of Court 2012; see also Malaysian 9 Civil Procedure 2015 at paragraph 55/2/1. I must, in other words, determine and decide the summary judgment Application afresh unaffected by the determination of the Sessions Court. [23] The principles involved in summary judgment are trite. In the Federal Court case of National Company of Foreign Trade v Kayu Raya Sdn Bhd [1984] 2 CLJ 220, George Seah FJ (later SCJ) held as follows: “…We think it appropriate to remind ourselves once again that in every application under O. 14 the first considerations are (a) whether the case comes within the Order and (b) whether the plaintiff has satisfied the preliminary requirements for proceeding under O. 14. For the purposes of an application under O. 14 the preliminary requirements are:

the defendant must have entered an appearance;

(ii) the statement of claim must have been served on the defendant; and

(iii) the affidavit in support of the application must comply with the requirements of r. of the O. 14. It is to be observed that a case is not within O. 14: (a) where no statement of claim has been served on the defendant; (b) where the indorsement on the writ includes a claim or claims outside the scope of O. 14 as coming within r. 1(2); (c) where the affidavit in support of the application is defective, e.g. in omitting to state the deponent's belief that there is no defence to the claim or part to which the application relates; (d) where the application is made in an action against the Government [O. r. 5(1) ]. If the plaintiff fails to satisfy either of these considerations, the summons may be dismissed. If however, these considerations are satisfied, the plaintiff will have established a prima facie case and he comes entitled to judgment. The burden then shifts to the defendant to satisfy the Court why judgment should not be given against him [see O. 14 r. 3 and 4(1)].” 10 Additionally in the oft quoted Supreme Court case of Bank Negara Malaysia v Mohd Ismail Ali Johor & Ors [1992] 1 CLJ 627, Mohd Azmi SCJ held as follows: “Under an O. 14 application, the duty of a Judge does not end as soon as a fact is asserted by one party, and denied or disputed by the other on affidavit. Where such assertion, denial or dispute is equivocal, or lacking in precision or is inconsistent with undisputed contemporary documents or other statements by the same deponent or is inherently improbable in itself, then the Judge has a duty to reject such assertion or denial, thereby rendering the issue as not triable. In our opinion, unless this principle is adhered to, a Judge is in no position to exercise his discretion judicially under an O. 14 application. Thus, apart from identifying the issues of fact or law, the Court must go one step further and determine whether they are triable. This principle is sometimes expressed by the statement that a complete defence need not be shown. The defence set up need only show that there is a triable issue. Where the issue raised is solely a question of law without reference to any facts or where the facts are clear and undisputed, the Court should exercise its duty under O.

If the legal point is understood and the Court is satisfied that it is unarguable, the Court is not prevented from granting a summary judgment, merely because "the question of law is at first blush of some complexity and therefore takes a little longer to understand". (See Cow v. Casey [1949] AER 197; and European Asian Bank AG v. Punjab & Sind Bank [1983] 2 AER 508 at 516).” [24] I have scrutinized the Appellant’s claims and Respondent’s defence and I find that the alleged triable issues are that the Appellant has not produced the requisite certificate of practical completion as well as that the Respondent has not yet received the released retention monies from Pembinaan SPK Sdn Bhd. [25] In respect of the non-production of the certificate of practical completion, I noticed that it is supposedly to be issued by the Respondent pursuant to clause 30 of the Sub-Sub Contract after the pipe-jacking work 11 is completed and successfully completed by the Appellant. There is no explicitly expressed requirement in the Sub-Sub Contract that completion is deem achieved only after the sewer line is tested and commissioned by Indah Water Konsortium. This requirement is raised for the first time by the Respondent in its unsubstantiated averment in its affidavit in reply to oppose the Appellant’s summary judgment Application. As a matter of fact, the Respondent did not produce any contemporaneous correspondence at all material times that this was indeed required particularly by responding to the Appellant’s letter dated 2 April 2018. It is plainly, in other words, an afterthought by the Respondent. [26] Be that as it may and since there is no particular agreed form or statement required for purposes of the practical completion certificate that is stipulated in the Sub-Sub Contract, I am satisfied that the Appellant’s joint measurement sheet of completed work dated 5 January 2018 and approved by the Respondent is as good as the certificate of practical completion under the Sub-Sub-Contract and I so find and hold accordingly. It is immaterial that the adjudicator in the CIPAA proceedings found the need to for a certificate of practical completion having being issued (although it is unclear whether pursuant to the Sub-Sub Contract or sub contract between the Respondent and Pembinaan SPK Sdn Bhd or even the main contract between Pembinaan SPK Sdn Bhd and the Government of Malaysia) because this is final determination of the dispute which will be conducted afresh unshackled by any of the findings of the adjudicator. 12 [27] As such, this is sufficient to trigger the release of the first moiety of the retention sum. [28] Nonetheless even if that joint measurement sheet of completed work is not to be construed as a certificate of practical completion, the Appellant may still recover in the absence of a certificate. [29] In this regard, I have recently held as follows in Frontprise Interior Sdn Bhd v Acoustro Corporation Sdn Bhd [2021] 1 LNS 633: “[25] Generally in building contracts, if there is an express provision for payment certification, then the payment claim will be premature if there is no certification by the certifier for the work done; see Lubenham Fidelities and Investments Co Ltd v South Pembrokeshire District Council and Anor (1985) 33 BLR 39 which has been adopted by the Court of Appeal in Ribaru Bina Sdn Bhd & Anor v Bakti Kausar Development Sdn Bhd & Anor [2007] 1 CLJ 552. [26] There are however exceptions for payment to be made notwithstanding that the payment claim has not been certified; see Keating on Construction Contracts 10th edition at paragraphs 5-028/to/5-037. [27] Consequently, the payment claim may be recovered in the absence of a certificate if the paying party prevented the issuance of the certificate; see Roberts v Bury Commissioners (1870) L.R. 5 C.P. 310 and also Al Waddan Hotel Ltd v MAN Enterprise SAL (Offshore) [2015] B.L.R. 479. [28] Additionally, the court is empowered to award payment as if a certificate has been issued if the jurisdiction of the court has been properly invoked; see Beaufort Developments (NI) Ltd v Gilbert-Ash Ltd [1991] 1 A.C. 266 and adopted in Chase Perdana Sdn Bhd v Pekeliling Triangle Sdn Bhd & Anor [2007] 6 AMR 533. 13 [29] In this respect, it is instructive to note that in the English Court of Appeal case of Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] W.L.R. 3850, Clarke LJ held as follows: “[23] … It does not, however, follow from the fact that a certificate is a condition precedent that the absence of a certificate is a bar to the right to payment. This is because the decision of the engineer in relation to certification is not conclusive of the rights of the parties, unless they have so clearly provided. If the engineer’s decision is not binding, it can be reviewed by an arbitrator (if there is an arbitration clause that permits such a review) or by the court. If the arbitrator or the court decides that the engineer ought to have issued a certificate which he refused to issue, or to have included a larger sum in the certificate which he did issue, they can, ordinarily will, hold that the contractor is entitled to payment as if such certificate had been issued and award or give judgment for the appropriate sum. It is convenient to make such an award or to enter a monetary judgment to avoid a risk of further proceedings in the event the employer does not pay. For the reasons that follow, I consider that the right to payment arises when a certificate is issued or ought to be issued and not when the work is done (although the doing of the work itself a condition precedent to the right to a certificate).”” Although I have held so in the context of an interim payment certificate, I hold that it is likewise applicable in respect of a practical completion certificate too. [30] Since the Respondent here has withheld issuing the certificate of practical completion to the Appellant without a legally valid and justified reason, I therefore hold that the Appellant is entitled to the release of the first moiety of the retention sum in the absence of the certificate of practical completion because it is deemed issued. [31] As for the release of the second moiety of the retention sum the Appellant has shown that more than 24 months had elapsed since January 2018 when the certificate has been issued or deem issued as 14 found pursuant to paragraphs [26] and [30] above respectively. Thus the second moiety of the retention money is triggered and also overdue when the action was commenced in the Sessions Court. [32] I am mindful that the Respondent contended that clause 21 stipulated that the second moiety of the retention sum shall only be released either after twenty four (24) months or upon the issuance of the release of the said sum from the Pembinaan SPK Sdn Bhd to the Respondent, whichever is later. According to the Respondent, it has not to date received any of the release of its retention sum from Pembinaan SPK Sdn Bhd. [33] Although this release of the retention money by the Respondent to the Appellant is contingent upon the corresponding receipt of retention money from Pembinaan SPK Sdn Bhd is expressly stipulated in the Sub-Sub Contract, I however find and hold that this provision is void by reason of s. 35 of the CIPAA which stipulates as follows:

Prohibition of conditional payment

Any conditional payment provision in a construction contract in relation to payment under the construction contract is void.

For the purposes of this section, it is a conditional payment provision when-

the obligation of one party to make payment is conditional upon that party having received payment from a third party; or

the obligation of one party to make payment is conditional upon the availability of funds or drawdown of financing facilities of that party. 15 Consequently I further find and hold that the only applicable provision on the release of the second moiety of the retention sum is 24 months from the issuance or deem issuance of the certificate of practical completion. [34] In summary, I therefore find that this is a plain and obvious case that the Respondent has merely raised issues but not triable issues in attempted defence against the Appellant’s claim. Summary judgment must accordingly be entered for the Appellant. 16 Conclusion [35] It is for the foregoing reasons that I made my decision as so ordered. Dated this 24 September 2021 t.t. LIM CHONG FONG JUDGE CONSTRUCTION COURT 1 HIGH COURT KUALA LUMPUR COUNSEL FOR THE APPELLANT: YEOH JIT WEI SOLICITORS FOR THE APPELLANT: J W YEOH & FENN COUNSEL FOR THE RESPONDENT: KULDEEP KUMAR SOLICITORS FOR TH RESPONDENT: J KULDEEP KUMAR