Pro Tech Diemold Sdn Bhd v Quantum Construction and Piling Sdn Bhd (WA-12BC-1-02/2018)

This is an appeal and a cross appeal against the decision of the Sessions Court handed down on 16th January 2018.

By the decision of the Sessions Court, after a full trial, judgment was entered against the Appellant for a sum of RM486,112.80 together with interest at the rate of 5% per annum from the date of issue of the Writ of Summons on the 10th November 2016 to the date of full realisation, with costs of RM30,000.00. 2

The Appellant, the Defendant below, being dissatisfied with the decision, appealed. The Respondent, the Plaintiff below, was also dissatisfied with the said decision of the Sessions Court. Hence, a notice of cross appeal was issued by the Respondent.

The Respondent was a contractor appointed by the Appellant to undertake piling works (complete with pile caps) on a piece of industrial land owned by the Appellant. The pilling works were for the purpose of the Appellant’s construction of a factory on the land.

The terms of the Respondent’s appointment were contained in a document dated 25th January 2015, which was essentially in the form of a letter with a proposal by the Respondent to the Appellant. The Appellant’s acceptance of this proposal was then endorsed on this letter by a director of the Appellant on the 26th of January 2015 and thus, a contract came into existence between the parties.

The Respondent’s pleaded claim was based on what it averred to in paragraph 19 of the Statement of Claim as Progressive Claim No. 3 dated 11th June 2015 for a sum of RM582,610.61. The Appellant on the other hand denied being liable on account inter alia that the Respondent was in breach of the contract between the parties. By reason of the Respondent’s 3 alleged breach, the Appellant claimed that it had suffered loss and damage and mounted a counterclaim for:

RM329,820.00 being the cost of remedial works made necessary by the Respondent’s alleged breach of contract,

RM47,700.00 being the cost for securing a consultant’s report and

special damages, namely:

monthly rental of RM4,500.00 per month to store the machines bought by the Appellant for 12 months, being RM54,000.00 till the date of the counterclaim and continuing at RM4,500.00 per month until the completion of construction of the Appellant’s factory;

(ii) depreciation value for the machinery of RM268,000.00 per year from the date of the purchase of the Appellant’s machinery till the date the Appellant’s factory is completed; and

(iii) monthly rental of RM7,100.00 per month for 2 factories rented by the Appellant for 12 months, amounting to RM85,200.00 per factory till the date of the counterclaim and continuing, at RM7,100.00 per month per factory until the completion of the construction of the Appellant’s factory. The Respondent’s Claim [7] In respect of the Respondent’s claim, the learned Sessions Court Judge allowed a total sum of RM486,112.80 made up as follows: 4 “Total work done (initial work) RM767,243.80 - RM605,551.00 RM161,690.80 Piling rig stand by from 1/4 – 7/5 (RM4,500 x 47 days) + RM211, 500.00 Steel plate stand by + RM 7,800.00 Bar bending machine stand by + RM 3,600.00 Additional pile length of 720 + RM101, 520.00 RM486,112.80” The sum of RM161,690.80 was an outstanding amount invoiced by the Respondent but not paid. This amount, together with the additional claims, made up the amount of RM486,112.80. [8] The Appellant, however, maintained that the award of RM486,112.80 in respect of the Respondent’s claim was not warranted. A great variety of issues were canvassed, and canvassed repeatedly, such that the legal bases for these claims were somewhat obfuscated. [9] As for the amount of RM161,690.80, being the balance for work done under the contract that was not paid, the fact that it was not paid was not really in dispute. It was fundamentally because of the Respondent’s alleged breach that precipitated the Appellant’s refutation of this claim. [10] In regard to the Respondent’s claims for the standing-by on site of its piling rig, Steel plate and Bar bending machine, the Appellant 5 contended that there was simply no justification for these claims and that the learned Sessions Court Judge had erred in granting them. These items were left idling for the reason given that the Respondent was waiting for instructions from the Appellant’s engineers. The instructions that were said to be required was due to an issue as to how the problem of the driven piles’ failure to achieve a load bearing capacity of 360 Tons, was to be resolved. [11] In regard to the additional pile length of 720m claimed by the Respondent, this related to the piles being re-driven upon the Appellant’s Consulting Engineer’s instructions. Instructions were issued for re-driving the piles because the piles that had been driven by the Respondent could not meet the load criterion of 360 Tons. Thus, the issue turned on whether it was the obligation of the Respondent to ensure that the piles driven to set could bear a load of 360 Tons. [12] The terms of the contract material to the claims in this action were the following: “1. BASIS We have based our quotation on the following basis:

1.1 Bill of Quantities for Driven Pile as given.

1.2 Method statement provided by Quantum Construction and Piling Sdn Bhd and subjected to S.O. approval.

1.3 Drawing given by the Consultant or any alternative design required will be endorsed by Professional Engineer. 6

1.4 All driven pile will be drive to set as per the drawing provided by the consultant.

1.5 The quality of the driven pile will be tested based on PDA test stated in the drawing.

PRICE AS PER BQ for 191 numbers of DRIVEN PILE works:

(A) LUMP SUM AMOUNT (DRIVEN PILE & RC WORK): RM920,000.00 (Ex. GST) (Malaysia Ringgit: NINE HUNDRED AND TWENTY THOUSAND ONLY)” [13] In so far as the price was concerned, notwithstanding the arguments made, it was plain that in relation to the 191 piles to be driven, the consideration was for a lump sum of RM920,000.00. As for the reference to the Bills of Quantities (“BQ”), it can be seen that it was referred to merely as a basis for the lump sum price quoted of RM920,000.00. [14] As for the basis of the quotation, it was expressed under the contract to be upon the BQ. The BQ attached to the contract, in turn, itemised the obligations of the Respondent including the specifications for the piles. What is significant is that neither the contract nor the BQ attached made any mention of the Respondent having to ensure that the piles driven would be able to bear the load of 360 Tons or 2 times the working load denoted by the acronym “2xWL”. The closest mention of this in the BQ was in item 2.04 which states, “To perform a Maintain Load Test to 2 times the working load for a 400mm x 400mm RC pile.” This provision, however, does not go so far as to make it an obligation on the Respondent 7 to ensure that the piles driven would meet the load bearing criterion of 360 Tons. It was for the performance of a Maintain Load Test. [15] There is then the Method Statement prepared by the Respondent. This Method Statement was dated 28th January 2015 and it made multiple references to the piling process and procedure, but not the load capacity that the piles were to be able to bear. Item 7 of the Method Statement stated in clear terms: “7. FINAL SET The final set of each pile shall be recorded as the penetration in not more than 25 millimeters per 10 blows. A set shall only be taken in the presence of the C.O.W.” 9 of the Method Statement states as follows: “9. BASIS FOR ACCEPTANCE OF INSTALLED PIPES a. The basis for the acceptance of the installed piles is that the driving criteria and the final set of a driven pile meet its design criteria requirement. b. Driven pile position must be properly guided on its position and verticality alignment. No piles are allowed to install with verticality alignment better more than 1:100 or otherwise recommended by engineers. c. The pile sections and details have been designed to safely carry the maximum design load as far as the strength of the pile section itself is concerned and subjected to its proper handling. The safe bearing capacity of the pile will depend on the driving criteria adopted and the actual soil conditions. Any driving criteria or final set suggested to the contractor by the Superintending 8 Officer shall only be guide and the contractor shall fully satisfy himself as to the suitability of the driving conditions and final set. The contractor shall have the right to adopt a different driving and final set provided their pile driving shall not damage the pile. d. For other types of piles or patented piles adopted, the contractor shall be fully responsible in all aspects of the design and installation of the piles. The acceptance of piles shall be on the same basis as laid down in clauses (a) to (c) above.” (Emphasis added) A careful reading of the Method Statement will disclose that it addresses the piling operation, process and the final set meeting the design criteria, not the piles ability to meet a predetermined load bearing criterion. It is also important to appreciate that the Respondent did not design the piles. The pile design was that of the Appellant’s Consulting Engineer. Thus it would be unlikely for a piling contractor to warrant that the piles, even if driven to set as required, would meet the intended load bearing capability of the its design. This too was the testimony of SP2, a Professor of Geotechnical Engineering from University Technology Malaysia, who testified as the Respondent’s expert. While, as a matter of contract, a piling contractor who did not design the piles may theoretically undertake that all piles driven by him would be able to meet a certain load bearing capacity, the intention to bear such a burden would have to be clear. [16] There is also some truth in the learned Sessions Court Judge’s reasoning that it would not make sense for a piling contractor to undertake to achieve a certain load capacity, being aware that there would be an element of uncertainty in soil conditions and, I would add, the contractor not 9 having designed the piles. It was the soil condition that was the reason given for the piles inability to bear the expected load. However, as I have stated, this is not to say that a piling contractor cannot expressly agree to bear such an obligation. Suffice to say, such was not the case here. [17] Learned counsel for the Appellant quoted from the textbook Construction Law 2nd Edition (2016) by Julian Bailey where it is stated: “In cases of where a contractor encounters poor site conditions, which it did not anticipate, and could not reasonably have anticipated, there is usually no implied warranty from the owner that the contractor will be able to perform its work without encountering physical obstructions on site. Moreover, for small domestic works … a competent builder would be expected to apprise himself of the nature of the ground conditions, and, if the ground conditions were bad, either take steps to … advise the client that ground conditions could affect the finished product. In such a case, the builder is usually in a better position than the owner to ascertain the ground conditions and determine their likely impact on the works.” (Emphasis added) The obvious difference in this case is that the Respondent was not the builder. The Respondent was only the piling contractor and one who did not design the piles. Learned counsel for the Appellant also relied on the case of Workshop Tarmacadam Co Ltd v Hannaby (1995) 66 Con LR 105 in which the English Court of Appeal held that, in that case, the hard rock encountered by the Plaintiff contractor did not entitle the Plaintiff to any extra payment. This however, is not quite the situation at hand. In this case, the Respondent’s contention is that it had complied with the contract terms and that a variation was required for the re-driving of the piles and, 10 having undertaken the re-driving of the piles upon the Appellant’s instructions, the Respondent was entitled to be paid. [18] The Appellant contended that the Respondent’s claims were special damages and particulars were not delivered. However, the Respondent’s claims were in fact founded in contract and they were itemised in the Respondent’s Progressive Claim No. 3, which was pleaded, and particulars of which were known to the Appellant. [19] In light of the foregoing, the Appellant’s Consultant Engineer’s requirement that the piles be re-driven was a variation and not within the original terms of the contract between the parties. This re-piling resulted in the use of an addition length of 400mm x 400mm RC Piles in respect of which the Respondent had charged a sum of RM101,520.00 in its Progressive Claim No. 3. I am therefore of the view that the learned Sessions Court Judge was not wrong in allowing the Respondent’s claim for this amount. [20] As for the other claims, namely the Piling rig stand by from 1/4 – 7/5, Steel plate stand by and Bar bending machine stand by, with respect, I do not see the basis for these claims being allowed. They were sums incurred because the Respondent was waiting for instructions from the Appellant’s Consultant Engineer. However, any instructions that may come from the Appellant’s Consultant Engineer would be regarded as works outside of the contract. They would be in the form of additional works or a variation. That being the case, if the Respondent chose to wait 11 for instructions and none were forthcoming, the costs incurred waiting must surely be a risk the Respondent had to bear. It was a choice made by the Respondent and there is no obligation on the part of the Appellant to continue to use the Respondent even if it had decided, upon its Consultant Engineer’s advice, to downgrade the piles to suit the soil condition or to re-design the piles themselves. Indeed, the Respondent itself had maintained that these are matters not within the purview of the contract. With respect, I am therefore of the view that these claims by the Respondent, namely the Piling rig standby from 1/4 – 7/5, steel plate standby and Bar bending machine standby, ought not to have been allowed. In addition, as was pointed out by learned counsel for the Appellant, idling time has been catered for in the contract. Therefore the price agreed at RM920,000.00 would have taken into account idling time. [21] It is clear and settled law that a Court exercising appellate jurisdiction ought not to interfere with the findings of a trial judge unless they are plainly wrong (see Clarke v. Edinburgh Tramways [1919] SC (HL) 35 at p. 36; Arab-Malaysian Finance Bhd v Steven Phoa Cheng Loon & Ors [2003] 1 CLJ 585). However, an appellate Court may interfere with the finding of a trial judge sitting alone if, “…the appellant satisfies the court that the judge was wrong and that his decision ought to have been the other way” (see Powell and Wife v. Streatham Manor Nursing Home [1935] AC 243, 249 per Viscount Sankey LC). In so far as the three items claimed are concerned I am, with respect, satisfied that they are unsustainable for the reasons stated. As such, the total sum awarded by the Sessions Court of RM486,112.80 ought to be reduced by the removal of the awards in 12 respect of these three items. The total amount for these three items was RM222,900.00. [22] As mentioned above, there is a cross appeal by the Respondent for its claims that were disallowed by the Sessions Court. These items of claim and their bases were set out in the submissions of learned counsel for the Respondent as follows: “(a) the additional security charges on site is an natural extension to look after the pile cap and the pile from being stolen. In view of the prolongation of time there is an additional costs therefore this cost of RM7,820-00 (page 777 to 779 of ROA Bhg C);

Perimeter fencing was not due to the Plaintiff’s fault but constitutes additional works. Therefore, the cost amounting to RM3,500.00 shall be borne by the Defendant. The perimeter fencing was originally constructed by another contractor which is obstructing the piling works. Therefore, in order to complete the works the perimeter fencing has to be shifted. The cost is based on the unit cost as per the said Contract. The rate charges is as per the agreed contract rate in the Bill of Quantities and this was not challenged by the Defendant.

the 26 PDA testing amounting to RM26,000.00 is an additional works which the Plaintiff is entitled to claim as stipulated in the letter of award dated 25.1.2015 at item 2.03 where one test is RM1,000-00 (page 950 ROA Bhg C). It is obvious that the Defendant has instructed to carry out the additional test in order for Tekton Beacon to carry out their reports (page 542 to 776 ROA Bhg C) and this claims was never challenge and should be allowed.

supply of excavator amount to RM6,000-00 to back fill of the deteriorated slope due to the rain where the Defendant has undertaken to make good any defect to the neighbour and instruction dated 16.2.2015 has been given to proceed [page 400 CBOD – Part B Jld 2 (page 923 ROA Bhg C) and pictures has been shown that the works 13 has been carried out (page 1028 to 1029 of ROA Bhg C). There is also labour dewatering the excavated trench and pit on site on 3.3.2015 to 31.3.2015 amounting to RM1,960.00 (page 789 of ROA Bhg C) . This has not been challenged by the Defendant and has to be allowed.

The claims is for 57 days (page 872 ROA Bhg C item 4(f)] from 27.3.2015 (page 882 ROA Bhg C) to the date of demobilization on 22.5.2015 although the picture shown is from 1.4.2015 to 18.5.2015 (page 1020 to 1023 of ROA Bhg C). This facts was never challenge and therefore the Plaintiff claims for additional 10 days amounting to RM45,000-00 i.e. RM4,500-00 per days.

The letter of award dated 25.1.2015 at clause 6.4 (page 947 ROA Bhg C) has clearly stated that the late payment interest is at the rate of 2% per month. This has not been challenged and should be allowed.” [23] The additional items in the Respondent’s counterclaim were not part of the original contract between the parties. These items were itemised under the heading “Variation Order” in the Respondent’s Progressive Claim No. 3. However, they were not works pursuant to any actual variation order or agreed to by the Appellant. Therefore I am of the view that the Sessions Court’s refusal to allow these claims, was not in error. [24] In regard to interest on late payments, clause 6 of the contract stated as follows: “6

TERMS OF PAYMENT 1 Each Payment shall be paid fully within Fourteen (14) days from the date of our submission of statement of progress claim on (Interim certificate shall be issued within 7 days after submission of statement of progress claim according.) 14

6.2 … …

6.4 Late payment will be subject to 2% interest per month until full settlement received.” The Respondent’s Progressive Claims No. 3, was dated 11th June 2015. If any sums were rightfully due thereunder in respect of the contract, the Appellant had 14 days from Progressive Claims No. 3 to make payment, i.e. by the 25th June 2015, before interest thereon at 2% per month may be added. Therefore, the Respondent’s claim for interest at 2% from the 11th of June 2015, the date of Progressive Claims No. 3, was not warranted. The Appellant’s counterclaim [25] The Appellant’s counterclaim was predicated entirely on an allegation that the Respondent breached the contract between the parties because the piles were not able to bear a load capacity of 360 Tons. It was by reason of this breach that the Appellant claimed that it had to undertake remedial works worth RM329,820.00. The Appellant also claimed for losses in having to rent factories for its own use and premises to store the equipment it had bought because it was not able to use the factory that it was building, due to the delay caused by the Respondent’s alleged breach of contract. On top of this, the Appellant also claimed for the depreciation of the machinery it had purchased because they could not be installed in the factory it was building due to the delay caused by the Respondent’s alleged breach of contract. 15 [26] However, having held that it was not a term of the contract that the Respondent had to ensure that the piles driven to set would be able to bear a load of 360 Tons, the alleged breach cannot be maintained. As such, I hold that the learned Sessions Court Judge’s dismissal of the Appellant’s counterclaim was not in error. Conclusion [27] Having regard to the foregoing I hold that the Appellant’s appeal and the Respondent’s cross appeal are allowed, in part, as follows:

the judgment sum of RM486,112.80 entered against the Appellant be reduced to a sum of RM263,210.80 which is made up of the sum of:

RM161,690.80 being outstanding payment for work done and

the sum of RM101,520.00 being for additional pile length of 720m;

(ii) interest on the sum of RM161,690.80 at the rate of 2% per month from 26th June 2015 to the date of full realisation; and

(iii) Interest on the sum of RM101,520.00 at the rate of 5% per annum from date of issue of the Writ of Summons to the date of full realisation. 16 After hearing counsel for the parties, it was ordered that there be no order as to costs. Dated this 28th Day of November 2018 -sgd- (DARRYL GOON SIEW CHYE) Judicial Commissioner High Court of Malaya Kuala Lumpur (Civil NCvC 2) 17 CASES CITED Yoong Sze Fatt v Pengkalen Securities Sdn Bhd [2010] 1 MLJ 85 Ku Jia Shiuen (an Infant suing through her mother and next friend Tay Pei Hoon) & Anor v Government of Malaysia & Ors [2013] 4 MLJ 108 Tengku Abdullah Ibni Sultan Abu Bakar & Ors v Mohd Latiff Bin Shah Mohd & Ors and other appeals [1996] 2 MLJ 265 CM Indah Sdn Bhd v UB Ushabina Sdn Bhd [2006] 4 CLJ 733 Green Nurture Sdn Bhd v Wing Onn Engineering Sdn Bhd [2015] 9 MLJ 39 Beh Lee Liang v Chew Sah Suak @ Chew Sar San & Anor [1996] 1 CLJ 173 Ban Chuan Trading Co. Sdn Bhd v Ng Bak Guan [2004] 1 MLJ 411 Malaysian Rubber Development Corp Bhd v Glove Seal Sdn Bhd [1994] 3 MLJ 569 Mathavan a/l Shunmugam v Woo Bee Leng [1995] 1 MLJ 841 Tan Sri Khoo Teck Puat v Plenitude Holdings Sdn Bhd [1993] 1 MLJ 113 Sivalingam a/l Periasamy v Periasamy & Anor [1995] 3 MLJ 395 Chuah Eng Khong v Malayan Banking Bhd [1998] 3 MLJ 97 Mulpha Pacific Sdn Bhd v Paramount Corp Bhd [2003] 4 MLJ 257 Majlis Perubatan Malaysia & Anor v Asia Pacific Higher Learning Sdn Bhd [2018] LNS 761 Kandasami Kaliappa Gounder v Mohd Mustafa Seeni Mohd [1983] CLJ (Rep) 7 Workshop Tarmacadam Co Ltd v Hannaby [1995] 66 Con LR 105 What Lies Beneath by Julian Bailey [2007] ICLR 395 Abdul Rahim Abdul Hamid & Ors v Perdana Merchant Bankers Bhd & Ors [2006] 5 MLJ 1 Sharpe v San Paulo Railway Company [1872-1873] L.R. 8 Ch. App. Alexander Thorn v The Mayor and Commonalty of London [1876] 1 App. Cas. 18 LEGISLATION AND LEGAL TEXT CITED Malaysian Civil Procedure 2015 by Sweet & Maxwell Rules of Court 2012 Evidence Act 1950 Contract Act 1950 Construction Law by Julian Bailey (2nd Edition, 2016) Construction Law in Malaysia by Sundra Rahoo and IR Harban Singh Sweet and Maxwell Malaysia [2012] McDonald v Mayor and Corporation of Workington [1982] Hudson 4th Edn, Vol 2, 228 Chitty on Contracts, Volume II, 32nd Edn COUNSEL FOR THE APPELLANT: TJ Lee (Siti Pervinah with him) (SF Chan & Co 4-3A-3A Kompleks Kantonmen Prima 698 Jalan Sultan Azlan Shah (Jalan Ipoh) 51200 Kuala Lumpur Tel : 03-2732 2728 Faks: 03-2732 2930) COUNSEL FOR THE RESPONDENT: Paul Lee (T G Lee & Associates Unit 35, 6-1 Jalan Semarak Api 2 Diamond Square Commercial Centre Off Jalan Gombak 53000 Kuala Lumpur Tel : 03-4021 2855 Faks: 03-4021 3855)