Seng Hiap Glass Sdn. Bhd. v C.E.L. Construction Sdn. Bhd. (JA-22NCvC-17-02/2019)

“Tower 1” (127 units) of 28 stories and “Tower 2” (157 units) of 36 stories;

a two-storey underground car park; and

a two-storey club house and sports facility. [3] The Defendant is the main contractor of the project. [4] By a letter of nomination on 20.02.2014 issued by DC Akitek (M) & Rakan-Rakan (“the Architect”) to the Defendant, the architect had, on behalf of the owner, notified the Defendant that the Plaintiff had been nominated as the sub-contractor for “Glazing and Aluminium Works” in the project (“the sub-contract works”) at the contract sum of RM6,228,000. The Defendant was, thus, instructed, inter alia, to enter into a sub-contract with the Plaintiff under the terms of the Pertubuhan Akitek Malaysia’s Standard Form of Sub-Contract for Nominated Sub-Contractor (“PAM Sub-Contract Works 2006”) and to issue a letter of acceptance of the nomination within seven (7) days thereof. [5] By a letter of acceptance on 16.01.2014 (“the Letter of Acceptance”) issued by the Defendant to the Plaintiff, the Defendant had duly accepted the nomination of the Plaintiff for the sub-contract works subject to the terms and conditions contained therein. The Plaintiff duly signified its acceptance of the award of the sub-contract works on 23.1.2014. (The contract between the Plaintiff and the Defendant as constituted by the Letter of Acceptance and the acceptance by the Plaintiff thereof shall hereinafter be called “the sub-contract”). THE PLAINTIFF’S CASE [6] The Plaintiff’s claim against the Defendant is for value of construction work done pursuant to the sub-contract together with other ancillary reliefs. The Plaintiff’s claims basically consists of four

parts:

the certified amount of RM947,989.23 (with the interest and Goods and Services Tax payable);

the certified amount retained of RM311,400.00 (with the interest payable);

late payment interest of RM156,011.58 on certified amounts and further late payment interest accruing on unpaid certified amounts (i.e., RM947,989.23 in (a) above); and

under certified (or uncertified) amount of RM298,989.81 (with the interest payable). [7] The Plaintiff pleads that it had completed the sub-contract works at the value of RM6,576,725.04 and variation orders at the value of RM1,089,555.52. [8] The Plaintiff further avers that the Architect and the quantity surveyor had certified via Interim Valuation Certificate Nos. 1-38 (which the Defendant itself had approved for payment via Progress Claim Payment Certificate Nos. 1-38) the value of sub-contract works done at the sum of RM5,774,180.77 and the value of variation orders at the sum of RM1,593,449.98. [9] The Plaintiff claims that its’ works had been under-certified by the sum of RM298,989.81 (hence, para 1 (d) above). [10] The Plaintiff further claims that, in breach of the sub-contract, the Defendant had failed to pay for Interim Valuation Certificate Nos. 35-38 in the aggregate sum of RM947,989,23 and the Goods and Services Tax (GST”) payable thereunder (hence, para 1(a) above). [11] Additionally, in breach of the sub-contract, the Plaintiff claims that the Defendant had failed to pay for Interim Valuation Certificate Nos. 4-34 on time and had failed to pay for Interim Valuation Certificate Nos 35-38 (in the aggregate sum of RM947,989.23) completely. As such, contractual late payment interest of RM156,011.58 is also payable to the Plaintiff as at 28.1.2018; and from then on, further interest accruing on RM947,989.23 is also payable to the Plaintiff (see para 6 (c) above). [12] Due to the Defendant’s failure to pay for the interim valuations, the Plaintiff had given the Defendant a notice to rectify the failure within fourteen (14) days thereof, failing which, it would terminate the sub-contract. The Defendant, instead of paying the sum as demanded, by a letter, purportedly terminated the sub-contract on the grounds that the Plaintiff had allegedly failed to complete the outstanding works. [13] As a result of the repudiation by the Defendant, the Plaintiff terminated the sub-contract. [14] The Plaintiff claims that upon the sub-contractor’s termination, the certified amount retained under the sub-contract (RM311,400.00) also became due and payable to the Plaintiff. THE DEFENDANT’S CASE [15] The Defendant submits that payment of any progress claim is subject to an Architect’s certificate. Without approval of an interim valuation by the Architect, the Defendant does not have the duty to make such payments. [16] The Defendant claims that the interim valuations were not certified by the Architect and that honouring of a payment can only be done by the Defendant upon an interim valuation being certified by the Architect. [17] Therefore, the Defendant submits that the non-payment of progress claims under Interim Valuation Certificate Nos. 35-38 was due to the interim valuations in question not being approved by the Architect in accordance with clause 6.3 of the Letter of Acceptance by Plaintiff dated 16.01.2014. [18] The main grounds for non-payment was that there were delays on the part of the Plaintiff, resulting in the Plaintiff not being able to complete the work within the time limit stipulated under the contract. Thereafter, the Plaintiff applied via a letter dated 04.06.2015 for an extension of time until 28.02.2016 to complete the work, and this was granted by the Defendant. [19] Although multiple extension of time were given by the Defendant to the Plaintiff, there were still delays and work was not completed by the Plaintiff. The Plaintiff contends that the issue of delay was attributable to the defects in facilities and the lack of a safe work environment provided by the Defendant for the Plaintiff to conduct its work. [20] To settle the issue of constant delay and non-payment of Progress Claim Certificate Nos. 29, 30, 31 and 32, a meeting was held on 02.11.2017 and attended by representatives of the Plaintiff and Defendant. (Encl 35, pg. 24). [21] At the meeting held on 02.22.2017 (“the said meeting”), it was agreed by the parties that the Defendant would make payment for Progress Claim Certificate Nos. 29, 30, 31 and 32 and in return, the Plaintiff would complete its outstanding work. [22] However the Plaintiff via a letter dated 06.12.2017, requested a further extension of time to 31.03.2018 to complete the outstanding work. (Encl 18, pg 118). [23] The Defendant alleges that despite multiple reminders and a Notice of Default sent by the Defendant to the Plaintiff, the Plaintiff still did not complete the outstanding work by the end of the extension period. [24] Therefore, via a letter dated 29.06.2018, the Defendant issued a Notice of Termination pursuant to the PAM Sub-Contract Work 2006 to terminate the sub-contract with immediate effect. [25] Via the same letter dated 29.06.2018, the Defendant further claimed for liquidated ascertained damages (“LAD”) pursuant to the Letter of Acceptance by the Plaintiff dated 16.01.2014 and the PAM Sub-Contract Work 2006. [26] The Defendant contends that the LAD imposed by the Defendant on the Plaintiff is due to the failure of the Plaintiff to complete their outstanding work in accordance with the latest revised work schedule. [27] The Defendant submits that the issues raised by the Plaintiff regarding the lack of proper and safe facilities to be provided by Defendant to Plaintiff is immaterial to the imposition of the LAD as all issues in regards to facilities provided by the Plaintiff were settled during the said meeting. THE PLAINTIFF’S SUBMISSION ON THE CAUSE OF DELAY [28] (i) As can be seen from the diametrically opposite positions taken by the parties, the Plaintiff’s claim for the unpaid sums owing hinges on the issue of whether the Defendant had failed to provide safe and secure facilities to enable the Plaintiff to complete the works within the time prescribed without compromising the safety of its workers. It can be inferred from a reading of the Letter of Acceptance, which clearly provides that the Defendant shall make available to the Plaintiff “such part of the site and such means of access as shall be necessary to enable the Plaintiff to execute the sub-contract works”.

(ii) If this Court finds that the Defendant had in fact breached the terms of the sub-contract in particular clause 11.1 of the Letter of Acceptance by failing to provide a safe work environment for the Plaintiff’s workers, then the Plaintiff was well within its right to terminate the sub-contract. Additionally, with regard to the Defendant’s failure to pay all the outstanding sums, it follows that the Defendant’s counter-claim for LAD must also fail.

(iii) If this Court finds that the Defendant did in fact comply with the provision of clause 11.1 of the Letter of Acceptance, then the Defendant would be within its rights to charge the Plaintiff LAD and to set off against the amount owing by the Defendant with the LAD charges imposed. [29] The main reason given by the Plaintiff for the delay was that the passenger hoist at the relevant tower had been dismantled since the end of August 2017 and the service lift was still not operational, despite it being agreed that the Defendant should ensure that the lift was in good operating condition and that the Defendant would also provide the Plaintiff with a gondola service. THE PLAINTIFF’S SUBMISSION ON THE CAUSE OF DELAY [30] In breach of its said duty to provide the hoisting and lifting services to the Plaintiff and PAM Sub-Contract 2006:

the Defendant had failed to ensure that the service lift was in a safe operating condition; and

the Defendant had failed to ensure that the service lift and gondola were in constant good operating condition. [31] Furthermore, in breach of the agreement reached during the said meeting, the Defendant had since the Plaintiff’s Progress Claim Certificate No. 40, delayed the approval of the Plaintiff’s monthly claim and thereby, effectively denied the Plaintiff’s rights to suspend the sub-contract works and to terminate the sub-contract on the grounds of non-payment. [32] The Plaintiff had repeatedly sought extension of time to complete the sub-contract works based mainly on the above matters, but the Defendant had not responded to the requests until it purportedly terminated the sub-contract. TERMS OF THE SUB-CONTRACT [33] In so far as material, the Letter of Acceptance provides as follows:

By clauses 6.1, 6.2 and 6.3, of the conditions of the sub-contract, the terms of payment should be by progress claim and the Plaintiff is required to submit its progress claim on a monthly basis and the period of honouring of certificates would be thirty (30) days from the date of the Architect’s certificate.

By clause 6.4, that the percentage of certified value retained (being the retention fund) should be at 10% and the limit of the retention fund should be at 5% of the contract sum.

By clause 24.1, that the Plaintiff may determine its own employment if the Defendant defaults in any of the following:

if the Defendant fails or neglects to pay the Plaintiff the amount properly due on any certificate (less any set-off which the Defendant is expressly entitled to make under the sub-contract), within seven (7) days after the period of honouring of the certificates.

By clause 24.2, that upon the occurrence of any default under clause 24.1, and if the Plaintiff decides to determine its own employment, then, the Plaintiff shall give to the Defendant, a written notice delivered by hand or by registered post specifying the default. If the Defendant shall continue such default for fourteen (14) days from the receipt of such written notice then, the Plaintiff may within ten (10) days from the expiry of the said fourteen (14) days, by a further written notice delivered by hand or by registered post forthwith determine its own employment under the sub-contract. Provided always that such notice shall not be given unreasonably or vexatiously.

By clause 24.5, that upon determination by the Plaintiff of its own employment, the Plaintiff shall within twenty-eight (28) days of the written notice of determination, give a written notice to the Defendant (with a copy to the Architect and consultant) of the date of inspection on-site to jointly record the extent of the sub-contract works executed and the materials and goods delivered to the site. Upon completion of the record, a copy shall be sent by the Plaintiff to the Defendant (with a copy to the Architect and consultant) and the records shall form the basis for the evaluation of the cost of the works executed by the Plaintiff.

By clause 26.17, that if the Defendant fails to pay the Plaintiff the amount due on any certificate (less any loss and/or expense or any liquidated damages under Clause 16.1 and set-off under Clause 26.13) within seven (7) days after the period of honouring certificates, or the Plaintiff owes a debt or fails to pay any sum due and owing to the Defendant within twenty-one (21) days after receipt of written notification by the Defendant of such debt or amount owing, a simple interest based on the Maybank base lending rate plus 1% shall be payable by the defaulting party on such outstanding amount until the date the payment is made.

By clause 11.1, that the Defendant shall from time to time make available to the Plaintiff such part of the site and the main contract works and such means of access as shall be necessary to enable the Plaintiff to execute the sub-contract works, but the Defendant shall not be bound to give to the Plaintiff possession or exclusive control of any part of the site or the main contract works. [34] No PAM Sub-Contract 2006 was in fact executed between the Plaintiff and the Defendant. However, by virtue of clauses 1.2 and 13.0 of the Letter of Acceptance, the PAM Sub-Contract 2006 applied to the sub-contract. THE COURT’S FINDINGS OF THE PARTY RESPONSIBLE FOR THE DELAY [35] The Plaintiff had repeatedly complained to the Defendant about the problems with the service lift and gondola, through its letters dated 06.12.2017, 16.04.2018 and 17.05.2018 (see Enclosure 18 pages 119, 114, and 163-164). There was no reply given by the Defendant to the above letters. What is clear is that from the many correspondences between the parties between the first letter of complaint from the Plaintiff dated 06.12.2017 until the last letter on 17.05.2018, none of the Defendant’s letters addressed the Plaintiff’s letters referring to the earlier complaints about the unsafe conditions of the service lift and gondola. [36] Had the Plaintiff’s complaints about the service lift and gondola been totally unwarranted, surely the Defendant would have replied in a timely manner, denying the allegation or even suggesting a visit to the site by each party’s representatives and the supervising engineer to settle the Plaintiff’s complaints. [37] The Defendant in attempting to rebut PW1’s evidence called DW1 to merely give a bare denial to the Plaintiff’s allegations. Additionally, the Defendant called the fourth Defence witness (DW4), the contractor who was appointed to complete the works, to say that he had no problems in using the service lift to go to the upper floors of the building. [38] It is to be noted that DW4 only came into the picture after the termination of the sub-contract and under cross-examination, DW4 admitted that he did not know that the Plaintiff had problems with the lift. The issue is not whether the service lift was capable of carrying a passenger up to the higher floors but whether it was unsafe for the Plaintiff’s workers to use to carry the window frames and glass. It is unreasonable to expect the Plaintiff to endanger its workers and expose itself to potential legal suits and workmen compensation claims in the event of any accidents. [39] Thus, I find DW1 and DW4’s evidence to be self-serving and on a balance of probabilities, not credible. I find the Plaintiff’s evidence on this issue to be more credible, which I accept as the true version of events leading to the termination of the sub-contract by the Plaintiff. [40] On this issue, I am guided by the decision of Gopal Sri Ram JCA (as he then was) in the case of Wong Hon Leong David v Noorazman bin Adnan [1995] 3 MLJ 283, at page 288, paragraph 1 where his Lordship states: “During arguments, we registered our surprise at the learned judge’s reluctance to enter judgement for this sum of RM100,000.00. After all the appellant had failed to respond to the letter of 17 December 1991. If there had never been an agreement as alleged, it is reasonable to expect prompt and vigorous denial. But, as we have pointed out, there was no response whatsoever from the appellant.” [41] This conclusion by Gopal Sri Ram JCA was approved and accepted by a subsequent Court of Appeal decision in the case of Small Medium Enterprise Development Bank Malaysia v Lim Woon Katt [2016] 5 MLJ where his Lordship Hamid Sultan JCA said at paragraph 8(a): “In the instant case, it was not in dispute that the respondent did not respond to the demand notice of the Plaintiff and the Defence alleging that he was not liable was only raised in the statement of Defence. Evidently, failing to respond to the Plaintiff’s letter of demand, that too when the defence case was related to forgery, as well as the fact that the Respondent did not lodge a police report upon receiving the demand weaken the probative force of the Defence’s case.” The learned judge then went on to quote and agree with the decision of the Court of Appeal in the case of Wong Hon Leong David v Noorazman bin Adnan cited earlier. [42] As in the cases referred to above, I find that the Defendants’, failure to reply to the Plaintiff’s complaint about the poor and dangerous condition of the service lift and gondola, weakens the probative value of the Defence’s case. [43] Having found that the delays are not attributable to the Plaintiff but in fact due to the Defendant’s breach of the sub-contract agreement by failing to provide a safe working environment for the Plaintiff’s workmen, it therefore follows that the Defendant’s refusal to pay the sums owing under Interim Valuation Certificate Nos 35, 36, 37 and 38 amounting to RM947,989.23 is without valid grounds. UNPAID CERTIFIED CONTRACT SUM UNDER INTERIM VALUATION NOS. 35, 36, 37 AND 38 [44] (i) I find that the Architect and the quantity surveyor on their behalf had certified the value of sub-contract works done to the extent of RM5,774,180.77 and the value of variation orders done to the extent of RM1,593.499.98 as at 30.04.2018 via Interim Valuation Certificate Nos 1-38. The Defendant had also approved payment to the value of sub-contract works and variation orders done to the same extent as certified by the Architect and/or the quantity surveyor via the corresponding Progress Claim Payment’s Certificates Nos 1-38.

(ii) I find that the Interim Valuation Certificates by the Architect and quantity surveyor amount to certification of work done by the Plaintiff up to the stage stated in the valuation certificates thus entitling the Plaintiff to the amounts certified. [45] The Defendant’s argument that Interim Valuations Certificate Nos 35-38 were never signed or approved by the Architect, thus not due for payment is misconceived. The Defendant had in reliance on these interim valuations issued its own Progress Claim Payments Certification Nos. 35-38. Additionally, DW1 had agreed under cross-examination that although unsigned, these are genuine certificates issued by the Architect and the only reason the Defendant stopped payment for Interim Valuation Certificate No. 35 was due to the delay in completion of the works (see notes of Evidence, Enclosure 96 pages 236, 268 and 269). [46] In breach of clause 6.3 of the Letter of Acceptance, the Defendant had failed and/or neglected to pay for the value of work done as certified by Interim Valuation Certificate Nos. 35, 36, 37 and 38 (and as approved for payment by the Defendant itself) in the aggregate sum of RM947,989.23, the particulars of which are stated in the Appendix to Enclosure 98 (Plaintiffs submission). These had been approved for payment by the Defendant itself via Progress Claim Payment Certificate Nos. 35, 36, 37 and 38 which can be seen in Bundle A1. [47] The Defendant had given the Plaintiff a UOB cheque No. 711831 dated 31.05.2018 for the sum of RM332,924.50 towards the payment of Interim Valuation Certificate No. 35 and the GST payable thereof, but its payment was stopped upon presentation. [48] Thus, I find the Plaintiff’s claim for the unpaid certified contract sum of RM947,989.23 under Interim Valuation Certificate Nos. 35, 36, 37 and 38 to be proven. GOODS AND SERVICES TAX (GST) ON THE AMOUNTS CERTIFIED UNDER INTERIM VALUATION CERTIFICATE NOS. 35, 36, 37 AND 38 OF RM56,879,36 WITH CONTRACTUAL INTERESTS. [49] (i) The Plaintiff had paid for the GST for the payments under Interim Valuation Certificate Nos. 1-38 and had duly issued to the Defendant the tax invoices for the payments certified under the said interim valuations.

(ii) In breach of clause 6.3 of the Letter of Acceptance, the Defendant had failed and/or neglected to pay the GST payable for the value of work done as certified by Interim Valuation Certificate Nos. 35, 36, 37 and 38 (and as approved for payment by the Defendant itself) amounting to RM56,879.36 as per the Plaintiff’s Tax Invoices No. C 102508 dated 30.03.2018, C 102574 dated 30.04.2018, C102663 dated 19.06.2018 and C102669 dated 30.06.2018. [50] Since I have found that the Plaintiff was justified in terminating the sub-contract based on the breach of the terms thereof by the Defendant, it follows that the Defendant is liable to pay the Plaintiff the certified retention sum of RM311,400.00 with interest thereon and also the under certified sum of RM298,989.81 which I have so ordered. THE DEFENDANT’S COUNTER CLAIM [51] Having found that the cause of delay in completing the works is attributable to the Defendant’s breach of its duty to provide a safe and reliable hoisting and lifting services to the Plaintiff under the terms of the sub-contract, I find that the sub-contract period to be at large. Therefore, for the above reasons and further due to the refusal by the Defendant to pay for the value of work done and certified by Interim valuation numbers 35, 36, 37 and 38, the Defendant is the party guilty of breach of the terms of sub-contract. Thus, the Defendant is not entitled to claim for Liquidated and Ascertained damages or any damages from the Plaintiff. [52] Additionally, the Defendant had also repudiated the sub-contract by purportedly terminating the sub-contract when the Plaintiff served on the Defendant the notice to rectify its breach of the sub-contract by its refusal to make payments on the Interim Valuations. [53] For the reasons aforesaid, I allow the Plaintiff’s claim and dismiss the Defendant’s counter-claim with costs. Dated 29 October 2024 …………t.t…..….………… Ahmad Murad Bin Abdul Aziz Judge High Court of Malaya Kuala Lumpur COUNSEL FOR THE PLAINTIFF: MR YOONG HOW KIAT SOLICITORS FOR THE PLAINTIFF: TETUAN H. K. YOONG COUNSEL FOR THE DEFENDANT: MS NURASHIDAH MD RAZIP SOLICITORS FOR THE DEFENDANT: TETUAN TAY, BERNARD & CHEONG Cases Referred to: ➢ Wong Hon Leong David v Noorazman bin Adnan [1995] 3 MLJ 283 ➢ Small Medium Enterprise Development Bank Malaysia v Lim Woon Katt [2016] 5 MLJ Legislation Referred to: ➢ Companies Act 2016 Decision date: 12.01.2024