Poratha Corporation Sdn Bhd v Technofit Sdn Bhd (WA-22C-41-07/2016)

9.9.2015, 16.10.2015 and 19.10.2015 and that the minutes of meetings were incorporated as terms of the said Sub-Contract. The Sub-Contract also incorporated “Contractor’s Scope of Works”, “Work Program”, HSE Obligations for the Defendant’s Contractor/ Subcontractor (OFC) and Pricing Schedules and Bill of Quantities. [4] Plaintiff’s scope of work covered 10 main areas and included the following as stated in the Addendum to the RFQ Documents (pg 62-73 CBOD 1): a) Installation of Pipe (Fabrication and Erection of Pipe and its supports, Receiving, Launching, Marking, Fit-up, Welding, 3 Reporting, Testing and Commissioning, Final Document Submission); b) Supply of Manpower for commissioning activities c) Provide accommodation and food for the workers d) Provide Consumables and Transport. [5] It was provided in clause 2 of the Sub-Contract, the Plaintiff shall commence the Sub-Contract works and shall complete the works within the Master Work Schedule. (pg 137 CBOD 1). [6] The work commencement date pursuant to the contract is on 16.10.2015 and the completion date is on 15.9.2016 (pg 57 CBOD 1). However the actual commencement date was on 17.10.2017 but nothing turns on this. Problems [7] The Plaintiff contended that its Sub-Contract Works were delayed because of delay attributed to the Defendant as follows: a) Delay in the supply of material by the Defendant; 4 b) Failure of the Defendant to provide sufficient trailers and cranes to shift the materials; c) Mistake in the fabrication of the spools received from Daelim. [8] According to the Defendant there were numerous complaints, reminders on the shoddy and slow work of the Plaintiff which was consistently falling behind schedule. A notice of default dated 12.5.2016 had earlier been issued by the Defendant in the light of the continuing lagging behind in the Master Work Schedule that had the snowballing effect of a breach of the Plaintiff’s obligation to proceed with the Sub-Contract Works expeditiously and without delay. The Defendant terminated the Sub-Contract on 26.5.2016 as the Plaintiff had failed to proceed expeditiously to complete the piping systems as specified in the Master Work Program Schedule of the Sub-Contract. Prayers [9] The Plaintiff maintained that the premature termination of the Sub-Contract by the Defendant was unlawful and in breach of the Sub-Contract. The Plaintiff claimed damages against the Defendant for breach of the Sub-Contract as summarized in paragraph 9.4 of its Statement of Claim as follows: 5 a) Balance payment due for invoices for work done until May 2016 of RM2,027,955.34; b) Expenses and costs for Idle Man Power from June 2016 until September 2016 due to the early termination of the contract for the sum of RM1,522,328; c) Direct and indirect expenses including Housing Deposit, Utilities, Levy/Visa/ Special Pass, Demobilization costs, unused gas cylinders and transportation charge, Sewage (Toilet Clearing) - Indah Water Waste removal RO Bin for the sum of RM97,108.14; and d) Loss of Profit equivalent to 20% of the unfinished works for the sum of RM455,648.10. [10] The Plaintiff’s Solicitors issued a Notice of Demand dated 30.6.2016 to the Defendant to claim the sum of RM 4,103,039.58. [11] The Defendant’s stand was that it had properly terminated the Sub-Contract under Clause 12.1 of the Sub-Contract for failure of the Plaintiff to proceed expeditiously and without delay on the Sub-Contract Works. 6 [12] The Defendant argued that the Plaintiff had failed to comply with the Master Work Program Schedule and due to that, the progress and percentage of the Plaintiff’s work had been delayed with ever widening gap between the agreed and actual completion. The Defendant also alleged in its Defence and Counterclaim filed that the Plaintiff had failed to increase the number of workers, machines and work equipment. Further the Plaintiff's quality of work was poor and that there were defects which the Plaintiff had failed to rectify. [13] The Defendant claimed damages arising out of the additional costs incurred in engaging other welders to complete the Sub-Contract and to rectify the defects as enumerated in paragraph 27 of its Defence and Counterclaim filed. The repair costs was in item 6 thereof of RM1,102,558.50 and the other items being the additional costs incurred in completing the Sub-Contract Works being RM 1,045,910.82. Principles [14] Learned counsel for both parties agreed that there are 2 claims that have to be paid irrespective of the legality of the termination of the Sub-Contract. One is with respect to the Plaintiff’s claim for Work done as 7 represented in the Invoices and the Additional Work done. The other is the Defendant’s Claim for rectification of defective works. [15] Both counsel also agreed that the other heads of claim of the Plaintiff would be dependent on whether the termination of the Sub-Contract by the Defendant had been lawful. In the event that the termination had been lawful then the Plaintiff would not be entitled to the remaining heads of claim as set out in its Statement of Claim in items 2-4 of paragraph 9.4. [16] The Court will then proceed to consider if the Defendant is entitled to the various heads of claim under the rubric of additional costs incurred in completing the Sub-Contract in items 1-12 of paragraph 27 of the Defence and Counterclaim with the exception of item 6 being costs of rectification of defective works and whether these claims had been proved. [17] Conversely, if the termination by the Defendant had been unlawful, then the Plaintiff would be entitled to the various heads of claim under items 2-4 of the Plaintiff’s Statement of Claim and the Court would have to consider if these had been proved. Correspondingly the Defendant would not be entitled to the extra costs incurred in completing the Sub-Contract Works. [18] The witnesses who testified at the trial are as follows: 8 a) The Plaintiff’s witnesses namely :

Karthick Ayyanar (PW-1)

(ii) Kartikeyan Murugesan (PW-2) b) The Defendant’s witnesses namely :

Nurol Tirmidzi b.Anuar (DW-1)

(ii) Mukhles bin Hamzah (DW-2) [19] For the record the Plaintiff had appealed against the part of the decision of this Court that is against them whereas the Defendant had not appealed against the said decision. Whether the Defendant had failed to pay the balance sum in the invoices issued by the Plaintiff for Work done and for Additional Work done [20] These were 8 Invoices for Work done and their dates and amounts claimed are as set out below:

(a)

(b)

(c)

26.2.2016 - RM 536,609.35 9

(d)

(e)

(f)

(g)

(h)

14.6.2016 - RM 423,380.45 [21] As can be seen these invoices were from January 2016 to June

The invoices were issued against the backdrop of Daily Progress Reports submitted by the Plaintiff to the Defendant. These Daily Progress Reports, from pages 186-603 CBOD 2, contain details and data on the work done by the Plaintiff each day and the payment for the work done was computed on tonnage basis. [22] The Defendant had never challenged or disputed the accuracy of the Daily Progress Reports at all material times including the scope of work done and the basis of billing where quantities are concerned. The various emails from the Plaintiff to the Defendant requesting for and reminding of payments due for work done from February 2016 can be seen at pages 941-951 CBOD 3(1). 10 [23] The Defendant had sought to raise the following reasons for non-payment during the cross-examination of the Plaintiff witness PW-1: i) That the Tax Invoices in respect of the work done by the Plaintiff were never received by the Defendant; ii) That the unit rate for additional work (consumables) was not agreed upon; iii) That the Defendant did not issue Progress Certificate for the invoices except for Invoice NoTSB-CON-15-002. [24] The Defendant is bound by its pleading and any denial has to be specific and not general. If indeed these Invoices had not been received then it does not explain how the Defendant could have made partial payments and indeed had paid for invoices for invoices (a) to (e) above as the Plaintiff through their learned counsel had confirmed this. [25] The need for contemporaneous protests if the contents of the invoices for work done are being disputed during the period of subsistence of the contract in question have been raised in a number of cases. Failure to detail the sum disputed and the reasons there for may give rise to estoppel against the party that had by design or default chosen to placidly hold its peace. 11 [26] In the case of Besteel Berhad v Pembangunan Ladang Hassan Sdn Bhd [2010] 1 LNS 923, the High Court held as follows at pages 32 to 34: “...The defendant must realize that if it is of the view that there is dispute as to the works executed by the plaintiff, it must express its displeasure or protest at the earliest opportunity. Silence in this case is definitely not golden. As pointed out Kang Hwee Gee J in L'Grande Development Sdn Bhd v. Bukit Cerakah Development Sdn Bhd [2007] 8 CLJ 507, interim certificates must be accepted as ascertained and verified facts until they are set aside or varied at the end of the job… ……. No attempt had been made by the defendant to amend the interim certificates. Nor is there any final certificate issued by the Konsultant Proses. There is no explanation by the defendant why such certificates were not amended or final certificates were not issued as it is within of the defendant's power to do so. Neither the relevant personalities in this dispute ie, Mr Richard Lee and Charles Lee were present in court to dispute the 12 plaintiff's claim. This inaction plus the letter of proposed payment by Mr Richard Lee in my view shows that the defendant does not have any defense to the plaintiff's claim for the retention amount.” (emphasis added) [27] A similar approach was taken by the High Court in the case Pacific Bunkers Pte Ltd v Owners Of The Ships Or Vessels "GENIKI SARAWAK" And "GENIKI JOHOR" & Another Case [2015] 1 LNS 109, it was held by the High Court as follows at page 26: “40. I am of the considered view that there is no triable issue in these 2 cases because:-

the Defendant did not deny the Invoices issued by the Plaintiff. The Defendant's failure to deny the Invoices means that the Defendant admits that the Defendant owed the Invoiced Sums to the Plaintiff..... [28] The oft-quoted dicta can be found in David Wong Hon Leong v. Noorazman bin Adnan [1995] 4 CLJ 155, at 159, where the Court of Appeal observed as follows: 13 "During argument, we registered our surprise at the learned Judge's reluctance to enter judgment for this sum of RM100,000. After all, the appellant had failed to respond to the letter of 17 December. If there had never been an agreement as alleged, it is reasonable to expect a prompt and vigorous denial. But, as we have pointed out, there was no response whatsoever from the appellant. In this context, we recall to mind the following passage in the judgment of Edgar Joseph Jr. J. in Tan Cheng Hock v. Chan Thean Soo & Anor [1986] 1 LNS 42; [1987] 2 MLJ 479 at 487: In Wiedemann v. Walpole [1891] 2 Q.B. 534, 537 an action for breach of promise of marriage, it was held, that the mere fact that the defendant did not answer letters written to him by the plaintiff in which she stated that he had promised to marry her, was no evidence corroborating the plaintiff's testimony in support of such promise. Lord Esher M.R., in his judgment, remarked, Here, we have only to see whether the mere fact of not answering the letters, with nothing else for us to consider is any evidence in corroboration of the promise.' (Emphasis added). 14 Earlier, in his judgment, he said, 'Now there are cases - business and mercantile cases in which the Courts have taken notice that, in the ordinary course of business, if one man of business states in a letter to another that he has agreed to do certain things, the person who receives that letter must answer it if he means to dispute the fact that he did so agree. (The emphasis is ours.)" (emphasis added) [29] There is also no merit in raising only during cross-examination of the Plaintiff witnesses that rates had not been agreed. If that was truly in dispute then the Defendant should have stopped the Plaintiff from proceeding and not when they have proceeded for 9 months to then raise this issue of rates. There was further no qualification that the payments made so far of RM3,628,921.16 was made preserving and reserving the Defendant’s right to dispute on the rates that they had not agreed. [30] I hold that it is too late in the day to raise this issue of rates when it was not so pleaded and when the circumstances of failure to raise a contemporaneous challenge to the issue of rates would be such that the Defendant is now estopped from so raising. At any rate the Defendant had not adduced evidence to show how the rates were unreasonable and what 15 would be a reasonable rate and that failure can only accentuate the emptiness of their present protest over rates. [31] I would draw inspiration from the astute analysis of Justice Lim Chong Fong in KC Leong Holdings Sdn Bhd v. Datin Moh Bee Ling [2015] 7 MLJ 10 below: “[30]...for the unit rate costing, I also prefer the testimony of the Plaintiff by reason that progressive payments were received from the Defendant as claimed by the Plaintiff without contemporaneous protest or challenge on the unit rate used by the Plaintiff. In fact, the Defendant did not even at that material time queried or demanded for the detail method and breakdown of the Plaintiff's claims. Moreover no contemporaneous protest was made by the Defendant on the written invoices of the Plaintiff dated 28 May 2007 and 18 June 2007 when the Project was nearing completion... ” (emphasis added) [32] The Defendant’s witnesses sought to explain that other than the certificate of payment issued for Invoice No.1 there were no other Certificates of Payment issued for the other Invoices 2-8 and hence they were not due for payments. Again this point was not pleaded. 16 [33] At any rate the Defendant had never raised any dispute on this ground of non-payment and continued making payment until 18.3.2016 (Invoice No.5 issued by the Plaintiff). The Summary for Invoices details and payment receipt details can be found at pages 166 CBOD 1. I cannot agree more with learned counsel for the Plaintiff that if the Defendant’s story is to be believed that the Defendant would pay the Plaintiff upon issuance of Progress Certificate that is debunked by the Defendant’s action of paying the Plaintiff until Invoice No.5. Bluntly put, it would be a case of blowing hot and cold. [34] What is very pertinent is that the Plaintiff had, at all material times, when submitting the Tax Invoices, also submitted the supporting documents (pages 14-17.222 CBOD 5, 18-172 CBOD 6, 1-202 CBOD 7) duly signed by the Project Management Team at the site. These documents namely the time sheets were signed, verified and approved by 3 of the Defendant’s representatives. An example of this can be seen at page 17.1 CBOD 5 for Tax Invoice dated 30/3/2016. (Q & A 42-47 pg 15-17 PW1-WS). [35] DW-2 also admitted under cross-examination that the Defendant’s representatives had verified and approved the work done by the Plaintiff. 17 [36] The Defendant cannot now depend on its own act of non-certification to refuse or deny payment. It is also no excuse to say that the certification had taken quite a while because of the many defects in the Plaintiff’s work. If the Defendant could identify the defects in the Plaintiff’s work, surely they would be in a position to certify so much of the Plaintiff’s work that was properly done. [37] In a context that is not dissimilar to the above, the High Court had occasion to remark as follows in ISO Technic Electrical Sdn Bhd v Calibre M&E Sdn Bhd [2017] 1 LNS 212: “[18] ...Defendant had never made any objections to any of Plaintiff's Progress Claims including the claims for the Additional Variation Works and instead RM3,169,176.44 had been paid to Plaintiff thus far and the outstanding balance of RM1,031,442.56 is now disputed by the Defendant. [23] ...There is no mechanism in the Letter of Award that the Progress Claim must be certified by the Defendant or an independent Consultant before the payment may be made. It is not then for the Defendant to say that they had not certified the Progress Claims and as such the amount claimed is open to dispute. Learned counsel for 18 the Plaintiff referred to Homewest Sdn Bhd v Vision Returns Sdn Bhd [2016] 5 CLJ 922; [2015] 11 MLJ 327 which is relevant to the issue of non-certification when certification is not a term of the contract. As summarized in the headnotes: [7] It was not disputed that the defendant and the architect had received progress claims No. 6-7 and the architect had not certified them. The architect's evidence in not approving the claims was that there were no consultant reports to support the claims. This was an internal arrangement between the architect, the defendant and the consultants. The plaintiff had complied with the requirements of cl 3.6 in submitting progress claims No. 6-7 to the defendant and architect. Non-certification by the architect was not fatal to the plaintiff's claim (see paras 23 & 26)." (emphasis added) [24] The Plaintiff had every expectation that as there was no objection, query, protest or dispute raised on the Progress Claims, it will be a case where the Progress Claims will eventually be paid by the Defendant. 19 [27] ...It must be noted here that each Progress Claim is supported by detailed documentation and it follows the format of a cover letter stating the amount due, a summary of Works done consisting of the Original Contract Sum and Variation Orders, the value of the Works done and the payments received and the total amount claimed. This is followed by about 70 pages of detailed Bill of Quantities detailing the description of the Works done, the quantities supplied, the rates, the amount, the percentage (%) completed, the value of current work done and a last column of the amount of "Total Work done." [32] ...It is only logical, reasonable and proper that when the Plaintiff had submitted a detailed BQ with every Progress Claim, it is incumbent on the Defendant to respond accordingly, and more so in a construction contract when it is not unusual for a dispute to easily arise over scope of work and percentage of works completed....” (emphasis added) [38] I am gratified to record that finally reality prevailed in that learned counsel for the Defendant, at clarification stage, was prepared to accept that in effect, as the Defendant had made payments for Invoices No. 1-5 and there remained only a sum of RM1,465,422.74 remaining unpaid for 20 Invoices 6-8 and I had allowed this sum claimed, being the balance outstanding for the work done by the Plaintiff up to date of termination. [39] With that admission made, learned counsel for the Plaintiff reciprocated with grace where the Additional Works claim was concerned. The Additional Works Invoices are at CBOD 1 pages 175 and 176 and pages 177 and 178 and the supporting documents are at CBOD 5 pages 14-17.222. [40] Learned counsel for the Plaintiff agreed that Items a) and c) at paragraph 98 of the Defendant’s submission be reduced by 20%. Assuming the work was done then the reduced sum for Item a) is RM57,663.60 and item c) RM117,364.40 [41] Learned counsel for the Defendant did not dispute, at the clarification stage the reduced sum for the Additional Works at paragraph 98 of his Submission at Items a) and c), being for consumables. Much goodwill was generated from being gracious to each other and learned counsel for the Defendant also finally did not dispute the claim for Additional Works represented in Items b) and d) of RM3,400.59 and RM7,532.24 respectively. 21 [42] Therefore the total of Additional Works from Items a) to d) of paragraph 98 of the Defendant’s Submission = RM185,960.83. [43] The 3 unpaid invoices at paragraph 104 of the Defendant’s Submission is RM1,465,422.74 and after adding Additional Works as revised of RM185,960.83, the overall amount is RM1,651,383.57 and so Judgment was entered for this sum. Whether the Defendant is entitled to claim the sum of RM1,102,558.50 for the cost of rectifying the defective works of the Plaintiff [44] It is not seriously disputed that the welding of P92 materials is a task that requires special skills. The P92 is a pipe of high content of chromium. [45] DW-2 gave evidence that the serious issues faced by the Defendant during the project execution was the lack of good quality and competent P92 welders from the Plaintiff to weld the P92 materials. The Plaintiff’s welders were mostly Indian welders who were not familiar with welding P92 materials. [46] For this specialized task the welders were required to pass a test conducted called the Welder Qualifying Test (“WQT”). From the WQT conducted from 22.10.2015 till 11.3.2016 at page 1089 CBOD 4, the 22 number of acceptable marked as “ACC” welders was low compared to the number of rejects denoted by “REJ”. [47] I am satisfied that the Defendant had sent the Plaintiff a List of Repair Works to be done by the Plaintiff and the identification of some 50 joints that needed repair with respect to the P92 materials as found at page 1201 CBOD 4. The Defendant had impressed upon the Plaintiff by their email dated 14.11.2015 at page 998 CBOD 3(2) of the need for urgent rectification works to be carried out. [48] The Defendant had also received complaints from its Client, Daelim in respect of the poor quality work by the Plaintiff. The Warning Notice dated 18.11.2015 from Daelim to Defendant can be found at page 1012, CBOD-3(2) which reads as follows: “Crack was found during reviewed film on joint F-19, drawing number 5LBB10-BR010-CAD-840(ID)-A”. [49] There was also the Warning Notice dated 25.12.2015 from Daelim to the Defendant at page 1015, CBOD-3(2) where the complaint is as follows: “Welding with wrong technique and sequences. 23 During night shift, welder number as below has found doing welding with wrong technique and sequences. This totally not acceptable, and will result to RT reject as happen currently repair rate is in critical situations. Furthermore, Heat & interpass temperature absolutely will be high (more than 350`C). Please refer photos”. [50] As a result of failure by the Plaintiff’s to provide qualified competent welders, the Defendant had no alternative but to engage welders from Korea and Thailand to rectify the welding rejected. The Plaintiff had also failed to submit repair plan to the Defendant though requested by the Defendant by their email of 31.3.2016 referring to a list of repairs from January 2016 at pages 1030 -1031 CBOD 3(2). [51] The question is whether the Defendant had proved the costs of rectification of RM1,102,588.50 claimed in its Counterclaim and captured in page 1199 - 1201 CBOD 4. DW-2 Encik Mukhles agreed under cross-examination that the source documents from which the summaries had been derived were not before the Court for verification and proof. [52] DW-2 further agreed under cross-examination that there were no supporting documents before the Court such as the Non-Destructive Testing (“NDT”) Reports, pre-heating time sheet or time charts, man-hour 24 details for repair work carried out and payment made. DW-2’s explanation was that these documents were with Daelim and TNB who was the owner of the project for verification. Surely the Defendant could have availed themselves of the provision of discovery of documents even if it were to be against a third party under Order 24 rule 7A Rules of Court 2012 but they have obviously failed to do so. [53] Alternatively or additionally the Defendants could have subpoenaed the relevant witnesses from Daelim and TNB. This Court would not allow that which is convenient to be a substitute for credible and cogent evidence. [54] To be more precise there are actually 3 components to the repair works claimed in pages 1199-1201 CBOD 4 namely that of manpower, consumables and equipment. [55] During cross-examination, DW-2 admitted that there were 62 workers listed but that there was no evidence as to the details of the workers with respect to the total hours for each worker and the details of payment of salary to these workers. 25 [56] With respect to the consumables, what was before the Court is a summary without the supporting documents and in particular there was no evidence of the use of P92 Welding Rod of 3.2 mm, 400kg. [57] With respect to equipment DW-2 reluctantly admitted that with respect to the 6 items of equipment and the number of days of usage and the rental rates of these equipment are not supported by documents and likewise the evidence of payment of the use of the equipment. [58] The problem arising from the poor presentation of the evidence is reminiscent of the problem discussed in ISO Technic Electrical Sdn Bhd v Calibre M&E Sdn Bhd [2017] 1 LNS 212 as follows: “[76] There is no documentary evidence to show what the labour is regarding, for if it is to complete the uncompleted works of the Plaintiff, then a proper list must be prepared showing exactly what were being done by the workers with regard to the expenditure of time to complete the uncompleted works and to rectify the defective works. [77] DW-2, Mr Tan Sun Nee was the Managing Director of STN Electricals Sdn Bhd that was engaged by the Defendant to finish the outstanding and defective works of the Plaintiff. He produced 26 invoices (without supporting documents), labour cards and letters found at pages 33-69 of CBOD3. Invoices by DW-2 do not make any references to any of the works stated in the Bill of Quantities that was in the Letter of Award. The invoices are without details of work the workers did that were supposed to be done by the Plaintiff. [78] There was another third party contractor, Tenaga WK Elektrik, represented by its principal DW-5, Mr Tham Wai Keon. Like DW-2, Mr Tham produced invoices (without supporting documents), labour cards and letters found at pages 7-22 of CBOD3. Again the Invoices by DW-5 do not make any references to any of the works stated in the Bill of Quantities that was in the Letter of Award given to the Plaintiff. Likewise the invoices are without details of work the workers did that were supposed to be done by the Plaintiff. I recall the analysis of such unsubstantiated invoices by Justice Lim Chong Fong JC in KC Leong Holdings's case (supra) at p 33 as follows: "[63] The defendant's cross-claim is massive comprising of essentially three heads of claim. Firstly there is special damages amounting to RM1,065,370.92 for remedying and rectifying multiple, gross and latent defects as submitted. In this 27 respect, the defendant has in substantiation produced the invoices of her rectification contractors such as Walk & Turn Builders, Shin Tat Construction Trading Sdn Bhd, DJ Deconway Furniture, Itex Power Enterprises, Kim Soon Electrical Engineering, etc that accumulated to that amount. There is no serious dispute that the defendant has paid against these invoices [64] On scrutiny of the invoices, I find that the items therein comprise of purported remedial work beyond those dealt under the third issue herein. In other words, there is a lot of other unexplained work. The defendant has merely collated all her payments made to the rectification contractors and held them entirely to the account of the plaintiff. This is plainly unsatisfactory and does not meet the requirement of proof of damages as held by the court of appeal in Sony Electronics

(M) Sdn Bhd v Direct Interest Sdn Bhd [2007] 2 MLJ 229; [2007] 2 AMR 229. In building contract litigation, I have expected the complainant to carefully sieve through and tabulate each and every relevant defect and the costs of remedying them systematically preferably also in a Scott 28 schedule. The tabulation must cross-refer to the defect as substantiated preferably by photographic records or other cogent mode of proof together with the corresponding item of expenses or costs incurred to remedy the defect as substantiated by the work invoices. The complainant must in honesty disregard those works that constituted improvement or addition/modification rather than rectification. In short, the complainant cannot 'throw the whole kitchen sink' of alleged unprocessed defects and expenses to the court to have them sorted out as presented by the defendant here.” (emphasis added) [59] Here is a case where the claim for special damages of RM1,102,558.50 for repair works are not fully supported by the relevant documents but that this Court is nevertheless satisfied on a balance of probabilities that there were genuine repair works that had to be carried out by the Defendant arising out of contemporaneous documents capturing the nature of the defects arising out of poor workmanship and unskilled workers. [60] This Court is satisfied that on a balance of probabilities the costs of the repair works is more than the retention sum retained for this purpose of 29 RM437,838.17 as stated at page 166 CBOD 1 and so this retention sum stands forfeited to the Defendant to cover for all costs incurred by the Defendant for the repair works. Whether the Defendant had lawfully terminated the Sub-Contract [61] The Defendant had terminated the Sub-Contract dated 22.11.2015 on 26.5.2016 for the Plaintiff’s breach of the Sub-Contract as the Plaintiff had failed to proceed expeditiously to complete the piping systems as specified in the Master Work Program Schedule of the Sub-Contract despite numerous complaints, reminders and notice of default dated 12.5.2016. The Notice of Termination is at pages 1050-1051 CBOD 3(2) and the Notice of Default at pages 976-978 CBOD 3(2). [62] Learned counsel for the Defendant had summarized the causes of the breach as follows in the Notice of Termination: a) The Plaintiff had failed to mobilize sufficient numbers of Project Management Team (“PMT”), tools and consumables required and had resulted a lot of inconvenience at site; b) The Plaintiff had failed to allocate sufficient manpower at the work area and had delayed the progress of work; 30 c) The Plaintiff had failed to provide a good quality P92 welders resulting in poor welding result and various welding defects discovered; and d) The Plaintiff had failed to comply with the site requirement whereby the working hours start from 7.00 am until 6.00 pm. [63] The termination of the Sub-Contract was made pursuant to clause 12.1. of the Sub-Contract which provides as follows: “If the Subcontractor abandons the Works, refuses or fails to comply with a valid instruction of the Contractor or fails to proceed expeditiously and without delay, or is, despite a written complaint, in breach of the Contract, the Contractor may give notice referring to this Sub-Clause and stating the default. If the Subcontractor has not taken all practicable steps to remedy the default within 14 days after the Subcontractor’s receipt of the Contractor’s notice, the Contractor may by a second notice given within a further 14 days, terminate the Contract. The Subcontractor shall however wait for further written instruction from the Contractor before proceeding with any demobilization activity. After receipt of such written instruction, the Subcontractor shall then demobilize from 31 the Site leaving behind Materials and Plant and any Subcontractor’s Equipment which the Contractor instructs in the second notice is to be used until the completion of the Works.” (emphasis added) [64] The evidence of DW-2 was that there was a failure to proceed expeditiously and without delay in completing the Works by the Plaintiff arising out of the Plaintiff’s failure to provide sufficient number of welders, lack of experienced and skilled welders and no proper planning of work. [65] It cannot be gainsaid that as at 27.5.2016 the Plaintiff had only managed to complete 33.3% of the work plan. The completion date of the project was on 15.9.2016 (pg 57 CBOD 1) with hardly 3 1/2 months left for completion. The serious delay is captured in the Daily Reports at CBOD 2 and summarized in the Table below: No Month Welding DIA Inch Plan per month Welding DIA Inch Achieved per month Average % 1 Oct 2015 200 0 0 2 Nov 2015 2500 108 4.3 3 Dec 2015 5500 1071 19.5 4 Jan 2016 9000 2150 23.9 5 Feb 2016 10500 3926.5 37.4 32 [66] As admitted by PW-2 during cross examination, the Plaintiff’s welders had only achieved 4553 welding DIA inch which was equivalent to 33.3% as at May 2016. As at the date of Termination, with hardly 3 1/2 months left before completion date, the Plaintiff had yet to complete the remaining 67% welding DIA inch from the Master Work Schedule. [67] Clause 2 of the Sub-Contract provides as follows: The Subcontractor shall commence the work upon receipt of the Contractor’s Instruction and shall duly complete all the Sub-Contract works within the Master Work Program Schedule. [68] The Master Work Program Schedule is found in Attachment 5 to the Sub-Contract at pg 137 CBOD 1. 6 Mac 2016 13000 5690.5 43.8 7 Apr 2016 15000 8392 55.9 8 May 2015 9500 4553 47.9 9 June 2016 6500 0 0 10 July 2016 3500 0 0 11 Aug 2016 2000 0 0 12 Sep 2016 479 0 0 77679 25891 33 [69] The expression to proceed “expeditiously and without delay” is similar to the expression of to proceed “regularly and diligently” as found in the PAM Contract and other standard form contracts. [70] DW-2 gave evidence that allocation of manpower at the designated area was inadequate and had delayed the progress. The Defendant had instructed the Plaintiff to provide additional manpower in order to achieve the daily target. [71] However, the Plaintiff did not make any immediate action to rectify the situation despite repeated reminders by the Defendant. This is evidenced in various emails dated 29.10.2015, 6.11.2015, 19.11.2015,

1.12.2015, 7.12.2015, 12.1.2016 (page 982 – 992 CBOD 3(2)). [72] The Plaintiff had attempted to shift blame to the Defendant by alleging that that materials in the form of pipes and spools were received late or incomplete. However there are contemporaneous emails from the Defendant to the Plaintiff on the materials delivered at site and indeed PW- 2, Mr Kartikeyan who is the Field Engineer of the Plaintiff, admitted having received 374 spools for the 4 systems in his email of 5.11.2015 at page 633 CBOD 3(1). [73] There was therefore no good reason for the Plaintiff not to be able to commence the welding works. 34 [74] The Defendant had once again reminded the Plaintiff to increase its work force in order to catch up with its work schedule by its email dated 1.12.2015 at page 988, CBOD 3(2). [75] The Plaintiff also sought to blame the Defendant for not making available the requisite number of cranes, trailers and lorries but I am quite satisfied that as and when the needs arose, the Defendant had supplied what was requested. See for example page 724 CBOD 3(1) and also Daily Report at page 466 CBOD 2. I can appreciate that the trailers are supplied based on the needs and the work plans of the Plaintiff to avoid unnecessary wastage. [76] The email dated 14.11.2015 (page 998, CBOD 3(2)) from the Defendant to the Plaintiff, written somewhat in a staccato style, epitomizes the exasperation of the Defendant where the Plaintiff’s slow and substandard work performance are concerned: “Dear Mr. Karthi, I wish to highlight the following issues for your immediate action to smoothen the STG piping work progress.

Welding of P-92 joints 35 Yesterday we got the radiography report for the 2nd joint (50%) and shocked the whole joint need to cut due to repair in all segments (crack, under cut, under fill, porosity, slags). As per client instruction you need to cut only by cutting wheel. Plan and repair the joint immediately. As per your suggestion, we are discussing to give clearance to go for 100% welding for p-92 joint without stop in 50% radiography. But repeatedly we found repair in the first 2 joints itself, we are really getting afraid of your welder performance. When we investigate with your welders, they told there is no proper tools for doing purging. Now they are not ready to start new joint until they will get proper tools.

Erection of piping Since there is no sufficient tools and tackles (5mt chain clocks, 10mt chain blocks, wire rope, lasing slings, winch) the Erection of individual spools (main steam, CRS, HRS) is under hold. There is no proper mobilization date given by you for our earlier mails. As you aware we are in delay in our schedule by one month. Your immediate action is required for mobilize the sufficient tools to catch up the schedule.

Machinery utilization 36 We are observing there is no proper plan to use the machinery from your side (Crane, trailer, EOT crane). After arranging the machinery, you not utilizing the same and changing your plans which leads the machinery for idle and not able to use by other depts.. Instruct your down level to plan properly.

Manpower mobilization As per your manpower organization chart, there is no sufficient riggers team for erection and material shifting. You are using the same for erection as well as spool shifting. Please give your plan for mobilization of riggers.

Toilet Installation We have already informed you verbally by myself and our safety dept to setup your mobile toilet for your workers (refer your ITP). One of your worker highlighted their problem today during common tool box meeting. Your immediate action is required for mobilization of mobile toilet.

Preheating M/c For your kind information, By today we will settle the power supply for our preheating machine in all elevations. 37 Kindly submit your welding schedule/plan to cover-up the fit-up joints weld completion (7 joints as on date- 8 mtr, 2 joints – 0 mtr)” [77] A sampling of some of the complaints received from the Defendant’s client Daelim with respect to the poor quality of work can be found in the Warning Notice dated 18.11.2015 from Daelim to the Defendant at page 1012, CBOD-3(2) where the complaint was as follows: “Crack was found during reviewed film on joint F-19, drawing number 5LBB10-BR010-CAD-840(ID)-A”. [78] There was also a Warning Notice dated 25.12.2015 from Daelim to Defendant at page 1015, CBOD-3(2) where the complaint reproduced in verbatim is as follows: “Welding with wrong technique and sequences. During night shift, welder number as below has found doing welding with wrong technique and sequences. This is totally not acceptable, and will result to RT reject as happen currently repair rate is in critical situations. Furthermore, Heat & interpass temperature absolutely will be high (more than 350`C). Please refer photos”. [79] As a result of failure by the Plaintiff to provide qualified competent welders, the Defendant had no alternative but to engage welders from 38 Korea and Thailand to rectify the welding rejection issue. This in turn led to a slowdown in the Works with the Works falling behind to worrying levels. [80] On top of that there was also the failure of the Plaintiff to keep to the working hours as provided for in the Sub-Contract which was from 7am - 6pm. DW-2 also gave evidence that the Plaintiff had also failed to attend repair joint exercise which had caused the numbers of accepted welding joint to be low compared to the targeted achievement numbers. I agree with the Defendant that this had caused a huge negative impact on progress and daily target. [81] To make matters worse the Plaintiff had also failed to submit repair plan to the Defendant. PW-2 agreed during cross examination that there was no plan produced in Court. It is more probable than not that the repair plan was never submitted to the Defendant despite repeated request from the Plaintiff. [82] In Kerajaan Malaysia v Ven-Coal Resources Sdn Bhd [2014] 11 MLJ 218 it was held that a gross and glaring delay on the part of a Contractor may safely be said to be a failure to proceed “regularly and diligently with the Works” as follows: “[40] There is the subjective element in determining whether one has proceeded 'regularly and diligently with the works'. Where there has 39 been a gross and glaring delay that a contractor is guilty of, it may safely be said that the contractor has failed to regularly and diligently carry out the works and the employer need not have to wait until completion date to terminate the contract. In other words an employer should not have to endure the agonisingly slow pace of the contractor's progress in the works.” (emphasis added) [83] There is of course the attendant risks involved in terminating on the ground of a failure to proceed “expeditiously and without delay” especially in cases where there is no proper Master Work Schedule. The Subcontractor may argue that they are able to accelerate the work and finish within the completion date or that they would be entitled to extension of time and as such the delay may not be as serious as it was made out to be. This is unlike the present case where the Master Work Schedule is part of the Sub-Contract in Attachment 5 at page 137 CBOD 1. [84] At the end of the day each case must be decided on its own merits or the lack of it, taking into consideration all the circumstances, some justifying termination and others in favour of affirming the contract. The dilemma of terminating a contract on this ground was discussed in Ven-Coal’s case (supra) as follows: 40 “[32] The plaintiff contended that the defendant was not likely to complete the project in 3 1/2 months based on the history of its delay without taking into consideration the reasonable request of the defendant for EOT of 189 days. The defendant castigated this as a pure conjecture and speculation. The learned authors Sundra Rajoo, Dato' WSW Davidson and Ir Harbans Singh KS in The PAM 2006 Standard Form of Building Contract, LexisNexis, 2010 at p 553 cautioned employers who are too keen to invoke this ground in cl 25.1(c) of the PAM 2006 contract which is in pari materia with cl 51(a)(ii) of the PWD 203 (Revised 10/83) contract as follows: Although being in practice the most common ground of determination by the employer due to the contractor's progress being 'slow', it is nevertheless a difficult ground to establish and many a determination premised on it has been ultimately invalidated by the courts and arbitral forum with dire consequences. Therefore, practitioners must not be too hasty to invoke this performance default until they are confident that it can withstand the relevant legal challenges. [33] In West Faulkner Associates v London Borough of Newham

42 ConLR 144 it was held as follows: 41 In the JCT contracts the phrase requiring the contractor 'to proceed regularly and diligently with the works' means that the contractor must proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work. The clause requires the contractor to proceed both regularly and diligently. Failure in either respect entitles the employer to terminate the contract. [34] The learned authors Chappeil, Marshall, Powell-Smith and Cavender in Building Contract Dictionary (3rd Ed), at pp 348–349 explained the meaning of the phrase 'regularly and diligently' as follows: … This phrase probably means more than an express restatement of the contractor's common law obligation as to progress ie it must bear some relationship to the specified date of completion and his progress must be constant, systematic and industrious. Whether or not the contractual standard is achieved is probably best judged objectively having regard to such matters as: 42 - The number of men retained on site compared to the number one would expect to be needed by a competent and experienced contractor faced with the same relevant commitments. - The plant and other equipment employed on the work in relation to the type and volume of work to be undertaken in the time available for completion. - The progress actually being made on the site relative to the volume and complexity of the work still to do to achieve contractual completion. A slow rate of progress judged against the performance of other contractors is an indicator that the contractor is not proceeding ‘regularly and diligently' although low productivity on site may well be explained by other factors which are outside the contractor's control. Hence, account must also be taken of any extenuating circumstances that are outside the contractor's 43 control which are hindering, or which may in due course hinder or prevent, the desired rate of progress. There is also at least one line of authority making it clear that merely going slowly is not, in itself a breach of contract and it will always be a difficult question to decide whether a contractor's progress amounts, in fact, to a failure to proceed regularly and diligently. However, the Court of Appeal has now given some useful guidance on the matter. 'What particularly is supplied by the word 'regularly': is not least a requirement to attend for work on a regular daily basis with sufficient in the way of men, materials and plant to have the physical capacity to progress the works substantially in accordance with the contractual obligations. What in particular the word 'diligently' contributes to the concept is the need to apply that physical capacity industriously and efficiently towards the same end. Taken together, the obligation upon the contractor is essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality 44 of work': West Faulkner Associates v The London Borough of Newham (1995) 11 Const LJ 157 per Simon Brown LJ at 161. That view usefully expands on previous judicial opinion which acknowledges that whereas the words generally convey a sense of activity, of orderly progress, of industry and perseverance, 'such words provide little help on the question of how much activity, progress and so on is to be expected … ': London Borough of Hounslow v Twickenham Garden Developments Ltd (1970) 7 BLR 81 …” [85] The Plaintiff claimed that they had applied for an Extension of Time (“EOT”) but that the Defendant had ignored their request. The Plaintiff said that the request for EOT was vide their email dated 25.3.2016 at page 957, CBOD 3(2). However that email was in reply to the Defendant’s email to increase manpower and production which the Plaintiff said they were not agreeable to and cited at paragraph 6 as follows: “3 months delay of material delivery by Technofit. So the schedule must be revised from 11th Sep 2016 to 11th December 2016 as per your construction (Master Program) plan.” [86] As pointed out earlier there were sufficient materials delivered for the Plaintiff to have begun work forthwith and I am satisfied that the non- 45 delivery of some materials did not fall within the critical path where the execution of the Works were concerned. The Plaintiff in its email dated 5.11.2015 at page 633 CBOD 3(1) had alluded that they could proceed with the Works at Site with the available materials. [87] To qualify for a proper EOT application the conditions required under Clause 7.3 must be met and in particular the formal application shall be made together with all supporting documents to enable the Defendant to consider the EOT application properly. [88] Clause 7.3 provide as follows: “Subject to Sub-Clause 10.3, the Subcontractor shall be entitled to an extension of time for completion if he is or will be delayed by any of the Contractor’s Liabilities. Upon receipt of an application from the Subcontractor, the Contractor shall consider all supporting details provided by the Subcontractor and shall extend the time for completion as appropriate” [89] I agree with DW-2 that the new detailed Revised Master Work Schedule of Works by the Plaintiff and its manpower plan must be submitted together with the application for EOT. 46 [90] As the Plaintiff as the Subcontractor refused and failed to comply with the instruction of the Defendant and due to the breach of the Sub-Contract despite repeated reminders to rectify the breach, the Defendant had served a notice of default dated 12.5.2016 pursuant to clause 12.1. of the Contract to demand the Plaintiff to remedy the default. See the Notice of Default dated 12.5.2016 at page 976-978, CBOD-3(2). Clause 12.1 of the Contract provide as follows: “If the Subcontractor abandons the Works, refuses or fails to comply with a valid instruction of the Contractor or fails to proceed expeditiously and without delay, or is, despite a written complaint, in breach of the Contract, the Contractor may give notice referring to this Sub-Clause and stating the default. If the Subcontractor has not taken all practicable steps to remedy the default within 14 days after the Subcontractor’s receipt of the Contractor’s notice, the Contractor may by a second notice given within a further 21 days, terminate the Contract. The Subcontractor shall however wait for further written instruction from the Contractor before proceeding with any demobilization activity. After receipt of such written instruction, the Subcontractor shall then demobilize from the Site leaving behind Materials and Plant and any Subcontractor’s 47 Equipment which the Contractor instructs in the second notice is to be used until the completion of the Works.” [91] The Plaintiff failed to comply with the Notice of Default dated 12.5.2016 and so the Defendant had by notice dated 26.5.2016 terminated the Contract pursuant to Clause 12.1. of the Contract. [92] The present case is not unlike the situation found in Teknik Segala Sdn Bhd v Salcon Engineering Bhd [2012] 9 MLJ 529 where the High Court held that the termination was lawful due to the serious delays by the Plaintiff despite many notices sent. At page 545 the High Court observed as follows: [49] It cannot be disputed that there were serious delays in the plaintiffs works under the contract and the defendant had sent many notices relating to the delay for example at p 621 before the termination and at p 660, after the termination. This was acknowledged by PW-1 during his evidence in court.” [93] I am satisfied that various reminders had been issued to the Plaintiff culminating in a Notice of Default followed by a Notice of Termination of the Sub-Contract and that the Termination was in the circumstances proper, valid and lawful. 48 Whether the Plaintiff is entitled to claim for losses for the sum of RM 1,522 328 for workers left idle, direct and indirect expenses for the sum of RM 97,108.14 and loss of profit equivalent to 20% of the unfinished works for the sum of RM 455,648.10; due to the termination of the Sub-Contract by the Defendant [94] As I had found that the termination of the Sub-Contract by the Defendant is valid and lawful, it would follow that the Plaintiff is not entitled to damages arising from what they contended to be a premature and unlawful termination of the Sub-Contract. [95] These are heads of claims which would be dependent on whether the termination was lawful and unlawful and the natural and logical consequences would flow and follow from the validity of the termination. [96] In the light of the finding of a valid and lawful termination by the Defendant, the Plaintiff’s claim would be confined to claims for Work done and Additional Work done for which this Court had allowed. Whether the Defendant is entitled to and has proved the cost of completing the unfinished work in the sum of RM986,948.68 [97] The particulars for damages suffered and costs incurred by the Defendant of completing the unfinished work of the Plaintiff are 49 particularized as follows at paragraph 27 of the Defendant’s Counterclaim and with the evidence supporting each head of claims is summarized in the Defendant’s submission and reproduced below: No Subject Amount (RM) Evidence 1 P92 Material 134,536.47 Page 1052-1086 CBOD-4 2 Welding Rejection Rate 10,816.89 Page 1087-1088 CBOD-4 3 Welding costs (WQT) 79,954.00 Page 1089-1094 CBOD-4 4 Salary & Accommodation (Thailand Welders) 184,601.00 Page 1095-1194 CBOD-4 5 Manpower, Consumables & Equipment (Pipe Support) 131,172.50 Page 1195-1198 CBOD-4 6 Repair Works 1,102,558.50 Page 1199-1201 CBOD-4 7 Salary & Accommodation (Korean Welders) 202,320,00 Page 1202-1210 CBOD-4 50 8 Bolt Tightening 195,820.00 Page 1211-1231 CBOD-4 9 Manpower, Consumables & Equipment (NCR Rectification Work) 2,622.00 Page 1232-1237 CBOD-4 10 Welding Claims for Small Bore 7,667.96 Page 1238-1249 CBOD-4 11 HSE Default 46,400.00 Page 1250-1272 CBOD-4 12 Grating 50,000.00 Page 1273-1281 CBOD-4 TOTAL AMOUNT 2,148,469.32 [98] Item 6 on repair works of RM1,102,558.50 had already been considered earlier and allowed for the full amount of the retention sum of RM437,838.17. [99] For item 4 and 7- Salary and Accommodation (Thailand & Korean Welders), the Defendant had reduced its claim to RM143,195.70 and RM184,763.16 respectively based on DW-2 testimony in Court. 51 [100] For item 11- HSE Default, the Defendant is now claiming in the sum of RM16,000.00 and not RM46,400.00 based on DW-2 testimony in Court. [101] Considering the fact that it is undisputed that the completion of works by the Plaintiff only reached 33.3% and the balance works of 66.7% were completed by the Defendant and the evidence as represented by the supporting documents for each of the heads of claims, I am prepared to accept that on the balance of probabilities the Defendant had incurred those additional sums being the costs to complete the unfinished works of the Plaintiff. [102] Learned counsel for the Plaintiff castigated these claims as self-serving and not proved as they are mere summaries. I have scrutinized the documents produced from pages 1052 - 1281 CBOD 4 and they are as detailed as any proper documentation could afford, descending to and detailing to packing lists, bill of lading, invoices, freight forwarders transport documents, names of workers, hours of work per day, rates of the workers, rental receipts, description of equipment and consumables used, to name a few. [103] However the Defendant is not entitled to claim this amount as the Defendant had agreed to limit the extra costs of completion to the agreed 52 consideration set out in clause 12.4 of the Contract. [104] The Defendant shall be entitled to a sum equivalent to 20% of the value of those parts of the Works not executed at the date of the termination. [105] Clause 12.4 of the Contract provide as follows: “12.4.Payment upon termination After termination, the Subcontractor shall be entitled to payment of the unpaid balance of the value of the Works executed and of the Materials and Plant reasonable delivered to the Site, adjusted by the following

12.4.1. …

12.4.2. …

12.4.3. If the Contractor has terminated under Sub-Clause 12.1 or 12.3, the Contractor shall be entitled to a sum equivalent to 20% of the value of those parts of the Works not executed at the date of the termination. (emphasis added) 53 [106] The Contract Sum is RM6,345,000.36 and the balance work to be completed shall take into consideration the Work done as well as the Additional Work done which is RM3,628,921.16 + RM185,960.83 = RM3,814,881.99. Therefore 20% of the balance value of Works not executed at the date of termination would be:

Contract Sum : RM6,345,000.36

Work done : RM3,628,921.16

Additional Work done : RM185,960.83

Balance works to be completed : RM2,530,118.37

20% of RM2,530,118.37 : RM506,023.67 Pronouncement [107] In the final analysis and assessment of the Plaintiff’s claim and the Defendant’s counterclaim I had entered judgment for the Plaintiff for the sum of RM1,465,422.74 plus Additional Works of RM185,960.83 which amounted to RM1,651,383.57 together with interest at 5% per annum from date of the Statement of Claim to realization. [108] The Defendant was entitled to the retention sum towards full settlement of the rectification works and so judgment was entered for this 54 sum of RM437,838.17 which shall stand forfeited to the Defendant and further a judgment for the sum of RM506,023.67 was entered for the Defendant for the agreed consideration for the extra costs in completing the balance Works of the Plaintiff under Clause 12.4.3. Both these sums shall carry interest at 5% per annum from the date of the statement of claim to realization. [109] After hearing parties on costs I awarded costs of RM50,000.00 to the Plaintiff. Dated: 15 March 2018. - Signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur For the Plaintiff: Sandosh Anandan and A. Gunaletchumi (Messrs Sandosh Anandan) 55 For the Defendant: Azmer Md Saad and Muhamad Azim (Messrs Lainah Yaacob & Zulkepli)