Sinwira Bina Sdn Bhd v Puteri Nusantara Sdn Bhd (JA-22NCVC-50-03/2016)

This case concerns a construction claim based on a letter of award dated 16.7.2015 which was issued by the defendant to the plaintiff. The letter of award was entitled „Appointment As Sub-Contractor‟ (hereinafter referred to as the „LA‟).

The defendant was the main contractor for a project in Langkawi, in the State of Kedah Darul Aman, known as “Cadangan Projek Pembersihan Teluk Dan Pembinaan Breakwater Sempena Langkawi Asean Summit 2015, Bandar Kuah, Daerah Langkawi, Kedah Darul Aman” (hereinafter referred to as „the said Project‟). The defendant appointed the plaintiff as one of the sub-contractors in the said Project.

The parties went through a full trial. On 27.9.2017, this Court delivered its decision and allowed the plaintiff‟s claim, inter alia, for a sum of RM1,584,672.50. The reasons for the decision are set down as below.

The employer/owner of the said Project was Lembaga Pembangunan Langkawi, in short “LADA”. LADA appointed the defendant as the main contractor of the said Project

The defendant appointed the plaintiff as the sub-contractor to undertake, construct and complete part of the works in the said Project, and the scope of works for the plaintiff were (i) to construct fringing reef,

(ii) to construct tidal gates and (iii) to lay geotextile and sand in the Page 3 of 16 lagoon (the scope of works shall hereinafter collectively referred to as “the said Works”). The total contract sum for the said Works was RM8,990,000.00. The Plaintiff‟s Claim [6] The plaintiff claimed against the defendant, inter alia, for work-done as follows: Description Total Cost (RM) Work done todate Amount Claimed Mobilization of manpower, machineries and others; provided all necessary equipment to construct temporary access road to reach the construction site; provide all necessary equipment to carry out excavation along the proposed Breakwater section RM690,000.00 100% RM690,000.00 Preparation of Health, Safety and Environment Management Plan; Implementation of Health Safety and Environment Management Plan RM200,000.00 100% RM200,000.00 Provide for contractor‟s Site Agent, Contractor is to engage a competent site agent with minimum requirement a degree holder and must be full time on site RM200,000.00 25% RM50,000.00 Supply and install Class 2 rocks average weight 182 kg rocks according to drawings and specifications:

Supply & Delivery to

(ii) Labour & Machineries for the installation Cost RM120 per m3 RM22.50 per m3 1717 1717 RM206,040.00 RM38,632.50 Supply and install geotextile on the lagoon bed level prior to laying the sand. Hate E800/2 Non-woven geotextile or RM800,000.00 5% RM40,000.00 Page 4 of 16 equivalent Supply only to site Install at site Removal & levelling of unsuitable material in the lagoon RM400,000.00 90% RM360,000.00 TOTAL: RM1,584,672.50 [7] Before the said Works could be completed by the plaintiff, the plaintiff ran into financial constraint because it did not receive payment for the partially completed works as per the above claims. The plaintiff also averred that it could not proceed and complete its scope of works because the defendant had failed to obtain the permit from the relevant authority(ies) or from LADA to transport and deliver the sand and rocks to the site (hereinafter referred to as the „Permit‟). As a result of the absence of the Permit and the non-payment of the partial work done, the plaintiff could not proceed and complete the said Works. The plaintiff had no alternative but to terminate the LA and proceed to file this action against the defendant for payments of work done up to date. The Defendant‟s Case [8] The thrust of the defendant‟s defence was premised on a „back-to-back‟ clause in the LA which states as follows: “The Sub-Contract Sum shall be paid to the Sub-Contractor on the basis of back-to-back payment, as and when received by the Contractor from the Client. Unless a special arrangement is made, the Employer shall not be liable to pay the Sub-Contractor in the Page 5 of 16 event that no corresponding payment is paid by the Client.” (the said „back-to-back clause‟) [9] The defendant averred that the claims made by the plaintiff were not consistent with the Bill of Quantities and were not agreed upon by the parties. The defendant also averred that the plaintiff did not comply and follow the terms of the contract documents in carrying out its works. The defendant further averred and denied that it was its duty and responsibility to obtain the Permit. The duty and responsibility to obtain the Permit was in fact on the plaintiff, instead of the defendant, the defendant submitted. The Findings of this Court [10] The parties had agreed the issues to be tried were as follows:

Samada Defendan berhutang terhadap Plaintif wang tunggakan yang berjumlah RM1,584,672.50 yang berdasarkan suatu Surat Perlantikan bertarikh 16.7.2015 untuk kerja-kerja Sub-Kontrak melibatkan kerja-kerja bagi tujuan pembinaan “fringing reef”, “tidal gates” dan “laying of geotextile and sand in lagoon” bagi sebuah projek dikenali sebagai “Cadangan Projek Pembersihan Teluk Sempena Dengan Langkawi ASEAN Summit 2015, Bandar Kuah, Daerah Langkawi, Kedah Darul Aman (“Projek tersebut”) dimana Plaintif telah membekalkan tenaga kerja, bahan-bahan, dan mesin-mesin untuk tujuan kerja-kerja Sub-Kontrak bagi Projek tersebut;

(ii) Samada Defendan berkewajipan dalam mendapatkan permit pasir dan batu-bata daripada Jabatan Tanah Langkawi (“permit tersebut”) yang merupakan satu syarat duluan sebelum kerja Projek tersebut dapat disempurnakan oleh Plaintiff. First Issue [11] Based on the contemporaneous documents adduced before this Court, the plaintiff had showed it had sent a total of five letters to the defendant pertaining to its claims for the work done (see exhibit B1, p.17 [dated 29.12.2015], p.18 [dated 27.11.2015], pp.19-20 [dated 27.11.2015], p.24 [dated 6.11.2015], pp.25-26 [5.11.2015]). [12] However, the defendant did not respond or refute the plaintiff‟s claim after it had received all the plaintiff‟s letters. [13] The defendant called only one witness, Mohd Niza Bin Abdul Mubin (DW1), who was the general manager of the defendant company at the material time, to give evidence for the defendant. He was charged with coordinating the said Project and daily operation of the company‟s affairs. [14] In cross-examination, DW1 agreed and admitted that the plaintiff had in fact carried out the works as claimed by the plaintiff. DW1 also admitted that the defendant did not reply to any of the plaintiff‟s letters. [15] DW1 further admitted that the plaintiff had in fact carried out the works as claimed. Based on DW1‟s admission alone, the plaintiff has Page 7 of 16 succeeded in proving its case. Although DW1 thinks that the plaintiff ought not to be paid because of the „back-to-back‟ clause in the LA, this does not preclude the plaintiff from discharging its onus in proving its claim on a balance of probabilities. Whether the „back-to-back‟ clause should prevail over the plaintiff‟s entitlement to immediate payment from the defendant is a separate issue which will be dealt with later in the judgment. [16] The plaintiff had made a positive assertion, i.e. that the defendant owned the plaintiff a sum, such positive assertion would compel the defendant to respond if the defendant denied such claim. Unfortunately, the defendant did not do so. This court is of the considered view that the defendant did not discharge its duty to reply the plaintiff‟s letters because when there is a duty to speak or act imposed on a party, and yet, the party keeps silent, this deliberate inaction or silence could be taken as representation to the other party as acceptance of such assertion. On these present facts, the inaction and silence on the defendant‟s part could be taken as representation to the plaintiff that the defendant was not denying the plaintiff‟s claim (see the proposition in the decision of the Federal Court in Public Textiles Berhad v Lembaga Letrik Negara [1976] 1 MLRA 70, p. 73). [17] The rates or prices quoted have to be agreed by the defendant/Employer before they were binding, this was stated in the LA, the defendant‟s counsel submitted. As explained in the preceding paragraph, the defendant did not refute the rates and prices provided by the plaintiff and that could be construed as a representation to the plaintiff that the defendant accepted the rates or prices quoted. Page 8 of 16 [18] The defendant‟s counsel also submitted that the plaintiff failed to prove its actual loss and expenses incurred, therefore, the plaintiff ought not to obtain judgment for the quantum as claimed even if the plaintiff succeeded in proving liability on the defendant‟s part (which was denied). This Court could not accept this submission because the plaintiff‟s claim was based on work done in the said Project. The plaintiff was not claiming for general or special damages, but for work done as stipulated in the LA and Bill of Quantities. All the plaintiff needs to satisfy the Court that it has executed his works, vis-a-vis work done as specified in its scope of works, (which was admitted by the defendant‟s own witness) for the plaintiff to be entitled to its claim. [19] Based on the above evidence before this Court, this Court will not hesitate to find the plaintiff has proved its claims on a balance of probabilities in that the defendant owes the plaintiff the sum as claimed. Hence, the first issue is answered in the affirmative. The Validity of the „back-to-back‟ Clause [20] I hold that the defendant cannot rely on the said back-to-back clause to defend the plaintiff‟s claim for the following reasons. [21] I am of the view that the LA or sub-subcontract would fall within the definition of a „construction work contract‟ in the Construction Industry Payment And Adjudication Act 2012 which came into force on 15.4.2014. The construction of the fringing reef and tidal gates involves construction of a structure or wall as defined as „construction work‟ in the Act. Hence, the Act would be applicable to the present LA. Page 9 of 16 [22] Section 35 of the Act renders a “conditional payment provision” in a construction contract void. [23] I find the said back-to-back clause is a “conditional payment provision” as provided in s.35 of the Act, and is therefore void. [24] The defendant did not refute the plaintiff‟s assertion that there was a previous agreement between the parties that the said back-to-back clause should not be applicable to the plaintiff‟s payments for work done. The counsel for the defendant submitted that the plaintiff should sue LADA for his work done instead of suing the defendant since the plaintiff insisted for a direct payment to be made from LADA to the plaintiff. [25] This is because following from the LA dated 16.7.2017, the plaintiff wrote a letter dated 20.7.2015 (see exhibit B1, p. 41) to the defendant and stated as follows: “2. It was previously agreed that payment to our company for the works done shall be directly assigned from Lembaga Pembangunan Langkawi (LADA) instead of from your good company as per stated in Cluase 3 of Letter of Appointment.” [26] The defendant‟s submission does not hold water. The sub-contract was entered into between the plaintiff and defendant, it is the defendant who owes a contractual obligation to pay the plaintiff for its works done, not LADA. When the plaintiff presented its claims to the defendant, the defendant did not in any occasion suggest that payment should be from Page 10 of 16 LADA or that it was not liable for the plaintiff‟s claim. The defendant could not now rely on the argument that the plaintiff should sue LADA. Second Issue – Who‟s duty to obtain the Permit? [27] It is in evidence that the plaintiff had written numerous letters to the defendant pertaining to the issue of obtaining the Permit (see exhibit B1, p. 27 [dated 14.9.2015], p.28 [dated 4.9.2015], p.29 [dated 28.8.2015], pp.31-32 [dated 24.8.2015], p.36 [dated 17.8.2015], and p.37 [dated 13.8.2015]). [28] The followings are the excerpts from the said letters concerning the enquiries and requests to the defendant to obtain the Permit: Letter dated 13.8.2015 (p. 37 – Exhibit B1) “Dengan segala hormatnya pihak kami merujuk kepada projek di atas dan mesyuarat LADA yang telah diadakan pada 11.08.2015 di mana pihak LADA telah maklumkan bahawa permit untuk pengangkutan pasir akan diselesaikan sebelum 16.08.2015 [emphasis added]” Letter dated 17.8.2015 (p. 37 – Exhibit B1) “2. Pihak kami ingin memaklumkan bahawa Permit Untuk Pengangkutan Pasir & Batu-bata masih belum diperolehi sehingga tarikh hari ini. Oleh itu, pihak kami tidak boleh menyiapkan kerja-kerja untuk Page 11 of 16 projek yang tersebut di atas pada 31.10.2015 seperti yang dicadangkan sebelum ini.

Pihak kami juga ingin memaklumkan bahawa jikalau Permit yang tersebut di atas masih tidak dapat diperolehi pada hari 18.8.2015 pihak kami terpaksa membatalkan penyewaan pantun (iaitu 2 unit) dengan segera.

Sekiranya Permit yang tersebut di atas diperolehi selepas tarikh 18.08.2015 untuk kerja-kerja pengangkutan pasir dijalankan, pihak kami akan memerlukan masa tambahan untuk re-mobilize pantun dan mesin-mesin yang diperlukan dengan kos tambahan. Pihak kami berharap hal yang disebut di atas dapat diselesaikan dengan kadar yang segera untuk meyelaraskan kerja-kerja projek di atas.” Letter dated 24.8.2015 (p. 32 – Exhibit B1) “d. Permit Pasir & Batu-Bata Sementara menuggu pengesahan Permit Pasir & Batu-Bata, Jabatan Laut tidak membenarkan pihak kami mengangkut pasir, batu-bata dan unsuitable material dengan alasan pihak kontraktor utama haruslah mendapat Surat Sokongan daripada Pejabat Page 12 of 16 Tanah Langkawi untuk memulakan kerja-kerja yang tersebut di atas.

Pihak kami memohon jasa baik supaya boleh mendapatkan Permit Pasir & Batu-bata serta permit lain yang berkenaan secepat mungkin memandangkan Kos Idling telah semakin membebankan pihak kami. Pihak kami ingin menarik perhatian pihak tuan bahawa perolehan Permit Pasir & Batu-Bata serta Permit lain bukanlah kerja dalam skop kontrak pihak kami [emphasis added].” Letter dated 28.8.2015 (p. 29 – Exhibit B1) “2. Mengikut rekod tapak harian, pihak kami telah mobilize mesin-mesin dan pantun-pantun pada 23.07.2015 dan tiba di tapak pada 28.07.2015 sehingga hari ini, pihak kami masih tidak dapat bekerja dengan sepenuhnya semasa tempoh kerja disebabkan Permit Pasir & Batu-bata masih belum dihulurkan kepada pihak kami daripada syarikat tuan [emphasis added] Kos Iding yang terlibat telah meningkat sehingga ke hari ini.

Pihak kami ingin menarik pehatian pihak tuan bahawa perolehan Permit Pasir & Batu-bata bukanlah tanggungjawap pihak kami [emphasis added].

Pihak kami di sini memohon jasa baik pihak tuan untuk mengadakan satu mesyuarat khas untuk menyelesaikan masalah seperti yang dinyatakan di perenggan 2 & 3 jikalau Permit Pasir & Batu-bata masih tidak dapat diberikan kepada pihak kami [emphasis added] sebelum 05.09.2015.” Letter dated 4.9.2015 (p. 28 – Exhibit B1) “2. Pihak kami berasa agak kecewa bahawa sehingga hari ini (iaitu 04.09.2015), pihak kami masih belum diberitahu tentang perihal Permit Pasir & Batu-bata dan harga pasir untuk pihak tuan yang tidak boleh diselesaikan dengan pihak LADA yang mana kesemuanya perihal ini bukanlah tanggungjawap pihak kami dalam urusan kontrak dengan pihak tuan [emphasis added].” Letter dated 14.9.2015 (p. 27 – Exhibit B1) “2. Pihak kami berasa agak kecewa kerana sehingga hari ini (iaitu 14.09.2015), pihak kami masih belum menerima apa-apa arahan dan jawapan mengenai perihal Permit Pasir & Batu-bata dan harga pasir untuk pihak tuan yang tidak boleh diselesaikan dengan pihak LADA yang mana kesemua perihal ini bukanlah tanggungjawap pihak kami dalam urusan kontrak dengan pihak tuan [emphasis added].” Page 14 of 16 [29] The contents of the above excerpts are self-explanatory and sufficient to show that the plaintiff was at all material times waiting for the defendant and/or LADA to arrange for the Permit in order for the plaintiff to proceed and complete its scope of works. [30] The LA (exhibit B1, pp.65-68) did not mention that the plaintiff was obligated to obtain the Permit. In the Minutes of Meeting held on 28.7.2015 (see exhibit B1 – pp.1-7, particularly p. 6 (or p. 5 of the minutes)), paragraph 4.1 stated: “Permohonan untuk mendapatkan kelulusan pasir di Kuala Muda akan dibantu bersama oleh LADA dan Pejabat Tanah Daerah Langkawi.” In the minutes, it also stated LADA was the party to take action in relation to paragraph 4.1. [31] Exhibit B1, p. 74, an email sent from the defendant to LADA addressed to one Ir Rohaya P. Kamal, Manager of Technical Engineering Department in LADA, contains the following: “Bagi memulakan kerja-kerja pengorekkan pasir di tanah milik LADA di Lot 60002, Padang Matsirat dan bagi memindahkan pasir tersebut ke tapak projek „breakwater‟, pihak sub-kontraktor kami, Sinwira Sdn. Bhd., memerlukan lesen permit pengeluaran pasir dari Pejabat Daerah & Tanah Langkawi. Salinan lesen itu perlu dikemukakan kepada Jabatan Laut Langkawi dan jabatan-jabatan lain yang berkaitan sebelum sub-kontraktor kami dibenarkan memulakan kerja-kerja pengorekkan dan pemindahan pasir. Page 15 of 16 …. Sehubungan dengan itu, kami berharap agar pihak LADA dapat menyegerakan bagi mendapat kelulusan lesen tersebut supaya kerja-kerja tersebut boleh dilaksanakan secepat mungkin. Seperti yang dimaklumkan di dalam „Recovery Proposal‟ yang dikemukakan baru-baru ini, kesinambungan dan kelancaran perlaksanaan projek ini amat bergantung kepada kelulusan-kelulusan pihak-pihak berwajib. Sebarang kelewatan dari segi kelulusan pihak berwajib tidak dapat tidak akan melewatkan tarikh penyiapan projek tersebut.” [32] The above email proffers two relevant facts. First, the defendant was aware at the material time that it was not the plaintiff‟s responsibility to procure the Permit/licence to transport and deliver the sand and rock to the site. Secondly, the party who was responsible to obtain the Permit/licence was the defendant through LADA. [33] Based on the above documentary evidence, this Court is satisfied that the plaintiff was not contractually obligated to obtain the Permit. This Court is also satisfied that without the Permit the plaintiff would not be able to complete its scope of work. The completion of the plaintiff‟s Works depended on the Permit. Therefore, the second issue is answered in the affirmative Page 16 of 16 Conclusion [34] Based on the above findings and reasoning, this Court allowed the plaintiff‟s claim for a sum of RM1,584,672.50, and interest of 5% per annum calculated based on the sum of RM1,584,672.50 from the date of the filing of the Writ to date of settlement, and general damages to be assessed by the Court, and costs of RM10,000.00 to the plaintiff to be paid by the defendant. -Signed- …………………………………. CHOO KAH SING Judicial Commissioner High Court, Johor Bahru Counsel for the plaintiff : Ungku Ahmad Hafis (Tang Pei Xin with him) Tetuan Chiong & Partners Counsel for the defendant : R. Jayasingam Tetuan BH Lawrence & Co.