Tan Chang Yong Holdings Sdn Bhd v Corporate Sunrise Sdn Bhd (WA-22C-28-04/2016)

8.2.2 There are also numerous complaints of the Hotel guests and many of them will (not) stay at the Hotel in (the) future. As such, the intended development of the Hotel’s reputation and good name has been tarnished.” 5 [12] The Defendant denied that it had breached the Contract and in reply thereto stated that it had executed the contract works with the approval of the M&E Consultant appointed by the Plaintiff and that the M&E Consultant had approved the works done by the Defendant including the Variation Orders. The Defendant further averred that the M&E Consultant had inspected and verified the M&E works done before approving its payment. Based on the Statement of Final Account for the M&E Package prepared by the M&E Consultant dated 11.6.2010 the Final Account Sum after taking into consideration the Variation Orders is RM9,624,049.54 and as only the sum of RM4,857,863.00 had been paid, the balance sum claimed by the Defendant was RM4,766,186.54 in the Amended Defence and Counterclaim. [13] The Defendant had also claimed for interest at 8% per annum from the date of the Statement of Claim on 11.1.2011 until settlement. Previous Proceedings [14] This would be an opportune time to state that originally this suit had been tried in the Kuantan High Court and the learned Judge had allowed the Plaintiff’s claim of RM3,794,000.00 for loss of Room Charges and had dismissed the Defendant’s counterclaim as having not been proved. 6 [15] On appeal by the Defendant, the Court of Appeal had set aside the said judgment of the Kuantan High Court and had ordered a retrial before another Judge presumably because the remedy given was not what was prayed for. [16] The focus of the Plaintiff’s claim as pleaded in the original Statement of Claim had been on a claim for damages to be assessed for the wrongful presentation of a winding up petition by the Defendant for failure of the Plaintiff to pay the Defendant the sum claimed by the Defendant under the Contract. However the Plaintiff had conducted the trial with evidence being led on the Plaintiff claim for damages for the loss of the Room Charges and the Defendant for the sum due under the Statement of Final Accounts as prepared by the M&E Consultant to justify the sum that it had sought to wind up the Plaintiff for non-payment of what it claimed to be an undisputed debt. [17] It fell upon me to hear the matter upon the Court of Appeal ordering a rehearing. Parties were amenable to amend their respective Statement of Claim and the Amended Defence to Counterclaim and so the amendments were effected to the Pleadings by consent and a Bundle of Amended Pleadings was filed for ease of reference. Both parties also agreed that there was no need to adduce fresh evidence and that this Court may 7 proceed to decide after perusing the Notes of Evidence (“NOE”) of the trial in the Kuantan High Court and after reading the written submissions of counsel and hearing both counsel. [18] After studying the NOE I agreed with both counsel that this was a matter where this Court could decide based on the evidence adduced which primary evidence was in the written letters, documents, statement of accounts, minutes and reports filed with the Kuantan High Court and made available to this Court without any disadvantages that may be had arising out of not having the audio-visual opportunity to hear and see the witnesses. Principles Whether the Plaintiff had proved the Defendant’s breach of the contract and the damages arising naturally from the breach in the loss of the Room Charges for the relevant period [19] To begin with there is no LAD clause and even if there is one, it is for the Plaintiff to prove its loss as stated in Selva Kumar A/L Murugiah v Thiagarajah A/L Retnasamy [1995] 1 MLJ 817 which was reaffirmed by a later Federal Court case of Johor Coastal Development Sdn Bhd v Constrajaya Sdn Bhd [2009] 4 MLJ 445. 8 [20] There was also no clause on issuance of a Certificate of Non Completion which is normally issued upon the expiry of the Completion Date so that the Defendant would be put on notice that LAD is payable if it can be proved. [21] Bereft of these 2 clauses normally found in construction contracts, there is difficulty in the Defendant completing the M&E Works by 30.11.2009 when along the came Variation Orders approved by the M&E Consultants. The rudimentary agreement is also devoid of any clause on application for extension of time. [22] The Variation Orders were to the tune of RM879,762.84 as can be seen in the Defendant Core Bundle of Documents page 32. As there is no provision for extension of time, it has to be implied that a reasonable time has to be granted for additional work done. [23] The term implied here would pass the officious bystander test stated in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at page 227 where McKinnan LJ described an implied term to be “....something so obvious that it goes without saying; so that, if, while the parties were making the bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common “Oh, of course!”. 9 [24] This is more so in a construction contract where variation works are not uncommon and that there would generally be an extension of time clause in the event variation works are instructed by the Superintending Officer. In the absence of such a clause one can infer and imply that a reasonable extension of time would be granted. [25] This reference to an implied term can also be justified by the Business Efficacy Test as propounded in Luxor (Eastbourne) Limited and Others v Cooper [1941] AC 108 where Lord Wright speaking from the House of Lords at page 137 described an implied term to be “...there may be cases where obviously some term must be implied if the intention of the parties is not to be defeated, some term of which it can be predicated that “it goes without saying”...necessary to give to the transaction such business efficacy as the parties must have intended.” [26] In BP Refinery (Westernport) Ptd Ltd v Shire of Hastings Council

16 ALR 363, the Privy Council helpfully set out the principles upon which the court will act in implying terms to the contract. i.e. 1)The term must be reasonable and equitable. 2) It must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it. 10 3) It must be so obvious that is goes without saying. 4) It must be capable of clear expression. 5) It must not contradict any express terms of the contract. See Yap Nyo Nyok v Bath Pharmacy Sdn Bhd [1993] 2 MLJ 250 and the Federal Court case of Sababumi (Sandakan) Sdn Bhd v Datuk Yap Pak Leong [1998] 3 MLJ 151 where the Federal Court applied both the “officious bystander test” and the “business efficacy test”. [27] Learned counsel for the Plaintiff had cited the above cases to justify importing implied terms that the Defendant as contractor would properly carry out the works with proper workmanship and materials. That is already a given and in fact the cases cited would be more relevant to importing and imposing an implied term of extension of time if additional Variation works are instructed, in this case by the M&E Consultant. [28] Time is generally not of the essence in a construction contract and if the Plaintiff had wanted to declare the Defendant in default after 30.11.2009, one would have expected a Notice of default given to the Defendant. As no Notice was given time becomes at large and the Defendant as contractor should complete the works within a reasonable time. 11 [29] The Defendant handed over the building with the works duly completed on 6.1.2010. In the circumstances I do not think that the Defendant could be said to be in default since 1.12.2009 till 6.1.2010. [30] This is also a case where the Plaintiff had agreed to a scheduled monthly payments to the Defendant but had defaulted in the payments. The final Contract Sum after negotiation and with a 3% discount given from the Quoted Sum was RM9,780,726.00 with a fixed payment schedule in the following manner: Gross Retention Net-Sept’ 09. 3,000,000. 150,000. 2,850,000 -Oct’ 09. 1,000,000. 50,000. 950,000 -Nov’ 09. 1,000,000. 50,000. 950,000 -Dec’ 09. 1,000,000. 50,000. 950,000 -Jan’ 10. 1,000,000. 50,000. 950,000 -Feb’ 10. 500,000. 50,000. 500,000 -Mar’ 10. Balance [31] The Plaintiff paid the initial first few payments according to the agreed payment schedule in the Contract. However the Plaintiff defaulted in November 2009 at a crucial time when the Defendant had a balance one month to complete the Works. 12 [32] The Plaintiff tried to make it up for the month of December 2009 in the sum of RM1,057,863.00 though this still fell short of the combined sum of November and December 2009 of RM1,900,000.00. [33] The fact that the Hotel commenced operation on 16.1.2010 was admitted by the Plaintiff’s own witness PW 1, Mr Tan Wee Lee, the Manager of the Plaintiff as follows at page 50 NOE: “113) S: When did the Hotel commence operation, isn’t it 16.1.2010? J: Yes, we announced it to the public on that date. 114) S: And it’s also posted on your website that the Hotel commenced business on 16/1/2010? J: Yes, it was” [34] In a case like this where there is no Notice of default, no Certificate of Non-Completion and delay in the agreed schedule of payment by the Plaintiff, it can hardly be said that the Defendant as contractor was in default from 1.12.2009 to 6.1.2010. [35] Assuming for a moment that there was breach on the part of the Defendant in failure to complete the works by 30.11.2009 and only completed by 6.1.2010, has the Plaintiff proved their loss in the Room Charges for the year 2010 from January to December based on total of 13 non-saleable rooms amounting to RM 3,823,960.00 as claimed in the Amended Statement of Claim? [36] To begin with the damages has to be strictly proved. In Popular Industries Limited v. Eastern Garment Manufacturing Sdn Bhd [1989] 3 MLJ 360 it was highlighted as follows at pages 367-369: “It is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon proof of the contravention of a right. Thus nominal damages may be awarded in all cases of breach of contract. And, where damage is shown but its amount is not proved sufficiently or at all, the court usually decree nominal damages. When, as here, the claim is for the difference between the contract price and a clear and undoubted market price, absolute certainty in proving damages is possible and therefore the court will expect precise evidence to be given. … In all the circumstances, reason and justice pointed to inevitable conclusion that although the plaintiffs had shown the fact of damage, 14 no evidence or no sufficient evidence had been adduced as to its amount with the perhaps unfortunate result that it is virtually impossible to assess damages. Accordingly, all I can do is to make an award of nominal damages of US500, that being the currency of the contract.” [37] There is no basis for the Plaintiff to claim the gross Room Charges because if at all there is loss suffered by the Plaintiff it must be confined to the loss of profit attributed to the Rooms Charges that could not be charged because the guests have to be turned away as a result of the rooms not being ready. [38] However there is no evidence led as to the costs in running the Hotel when divided by the number of rooms. The damage suffered must be limited to the loss of profit and not loss of Room Charges or loss of revenue. To charge loss of Room Charges to the Defendant would mean there is no costs element at all in the running of the Hotel! That cannot be right. Costs in running a Hotel would cover staff costs, food and beverage costs, utilities, marketing and promotion costs and the like. [39] From the documents prepared by the Plaintiff to substantiate and support their claim for loss of Room Charges there is clearly a case where going by rooms available for the various months from January to December 15 2010 there is not full occupancy of the rooms available. See pages 733-745 Tab O of Plaintiff’s Core Bundle of Documents. [40] From the evidence of PW 2, Miss Laura Daniel, who worked as a secretary in TCY Century Management Sdn Bhd, the company that manages the Hotel, we learned that the occupancy rate of the Hotel even based on the rooms available, according to her, was 20.44% in January 2010 andincreases to 53.05% by December 2010. As she only started work in August 2010 she had no personal knowledge of the so-called loss of Room Charges from January to July 2010. When asked why the rooms were not let out she was candid to admit that technically she did not know. [41] That being the case, there is no basis for charging the so-called Rooms not available to the Defendant when the Plaintiff themselves could not fully let out the available rooms. It is of course not unusual and indeed quite common for a new hotel not to have full occupancy during the initial years of business. To charge the Defendant based on a 100% occupancy when that was not achieved throughout 2010 would be to require the Defendant to pay for what the Plaintiff could not achieve on their own and that would amount to a windfall and be against all known principles of assessment of damages! 16 [42] Learned counsel for the Defendant advanced yet another ground as to why the Plaintiff is not entitled to a claim of RM3,823,960.00. The Plaintiff has entered into a management agreement whereby one of its subsidiaries TCY Century Management Sdn Bhd (“TCY”) shall manage the Hotel and pay to the Plaintiff 30% of the net revenue as provided for in Clause 4.2. The agreement is at Tab V of the Plaintiff’s Core Bundle of Documents. [43] It is trite law that even wholly owned subsidiaries are separate legal entities from its parent company. To make it even clearer it was provided in Clause 4.5 that TCY was not operating the Hotel as an agent of the Plaintiff; in other words TCY was a separate and distinct entity operating the Hotel in its own right. [44] If authority is needed one can cite the case of Mackt Logistics (M) Sdn Bhd v. Malaysian Airline System Bhd [2014] 2 MLJ 518 where it was observed that: “[24] In Malaysia, the Salomon principle was applied in Abdul Aziz bin

Atan & 87 Ors v. Ladang Rengo Malay Estate Sdn Bhd [1985] 2 MLJ There, the issues that come up for determination were whether the estate was sold and, if so, whether a change of employer took 17 place. The court dismissed the appeal and held that an incorporated company was a legal person separate and distinct from the shareholders of the company. At pp 167-168, Shanker J had this to say: It is trite law that an incorporated company is a legal person separate and distinct from the shareholders of the company. The company from the date of incorporation has perpetual succession and the Companies Act provides that the liability on the part of the shareholders to contribute to the assets of the company will be limited in the manner provided by law and its memorandum and articles of association. The whole point of forming a limited company is that the shareholders can have in their hands the management of the business without incurring the risk of being under unlimited liability for the debts of the company. ……. [26] Zakaria Yatim J (later FCJ) in Bank Bumiputra Malaysia Bhd & Anor v. Lorrain Esme Osman & Ors [1987] 1 MLJ 502, rightly held that a holding company and its subsidiary are separate entities.” 18 [45] There is no evidence that the Plaintiff has not received the agreed fees for the year 2010. On the contrary the evidence led is that the Plaintiff had received RM2.477 million from TCY in 2010. The evidence is borne out by the testimony of PW 1, the Manager of the Plaintiff in cross-examination as follows at pages 137-138 of the NOE: “6) S: Do you also know that from 11/12/2009 whatever income collected from the hotel ought to go to TCY Century Management Sdn Bhd, correct? J: Yes 7) S: Do you also agree that from 11/12/2009 whatever monies that Tan Chang Yong can collect in respect of this hotel will only be 30% of what Century Management has collected, correct? J: Yes. 8) S: Therefore, do you agree with me if you look at Enc 61 page 72, about the revenue of the company and the group and do you agree with me that at page 72, in respect of the hospitality income of RM2.477 million which goes to Tan Chang Yong Holdings, correct? J: Yes. 9) S: So, therefore in 2010, RM2.477 million if this agreement is accepted is only 30% of the revenue of the Hotel, correct? 19 J: Yes.” [46] There is a yawning gap between the sums as given by the Manager PW 1 in that 30% of the gross revenue of the Hotel in 2010 was RM2.477 million and that of PW 2 the secretary of the TCY that manages the Hotel as based on her evidence, the whole of the gross revenue from the Room Charges is only RM2,265,363.39 by adding up the revenue from January 2010 to December 2010 from pages 734-745 of the Plaintiff’s Core Bundle of Documents. [47] At the end of the day one cannot escape the observation that the documents produced by the Plaintiff itself do not support and substantiate the Plaintiff’s loss. In fact the contradiction in the gross revenue from the Room Charges between the evidence of PW 1 and PW 2 would cast doubts of the reliability of those sums from which the Plaintiff is trying to project the loss of revenue from the Room Charges for the whole of 2010 attributable to the breach by the Defendant of the Contract. One is reminded of the dicta in Sony Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007] 2 MLJ 229 where it is summarized as follows in the head notes:

It was clear that the statement of account exhibited were by themselves not sufficient to establish the respondent’s claim for 20 damages. They only showed profit for 1996 and 1997. They did not show how the alleged loss had come about. The respondent failed to prove the contents and show how their contents were related to the alleged breach of the agreement. No evidence whatsoever was led by the respondent with regard to the computation or breakdown of the loss allegedly suffered therefrom flowing from the breach (see paras 53-54).

The respondent’s failure to produce or tender the account books or the necessary support documents upon which the audited statements of account were based is fatal to his claim for damages. Thus, the audited statements of account and the respondent’s oral evidence in connection therewith were inadmissible (see para 55).

In a situation where there is an infringement of legal right such as this but where there is no basis for ascertainment of the amount of loss suffered, a nominal damage may be awarded (see para 97)…” [48] From the Plaintiff’s own documents stating the number of rooms available per month. one would notice that even assuming for a moment that the unavailable rooms are attributed to the fault of the Defendant somehow, there is still no 100% occupancy of the so-called available rooms. Therefore there is no room for the argument that guests had to be 21 turned away because there is full occupancy of available rooms with the result of loss of Room Charges leading to loss of profit. [49] This is the case every month for the whole year of 2010 and even though the occupancy rate has improved by December 2010 it was just 53.05 %. To calculate loss of profit based on loss of revenue in the Room Charges would not only be contrary to all known principles of assessment of damages without taking into account the costs factor but it would also be totally unrealistic to calculate based on the projection of 100% occupancy for all the rooms every month for a hotel in the first year of its operation. [50] The Court of Appeal in Lay Hong Food Corporation Sdn Bhd v Tiong Nam Logistics Solutions Sdn Bhd [2017] 1 LNS 708 rejected self-serving summaries of losses suffered by the Plaintiff without the empirical base documents to substantiate and support the base data. The Court of Appeal astutely observed as follows: “48. On another note, the basis of the claim by the Plaintiff (TN Logistics) for damages for loss of profits is based on an average of sales multiplied by 6 months. The Plaintiff (TN Logistics) is relying on the average gross sum of the invoice value. This cannot be an accurate figure as overhead costs such as petrol, the costs of hiring of drivers, 22 operation costs and maintenance has to be factored in, to arrive at a net figure. Only then can a realistic profit figure be arrived at. To allow such a manner of calculation as adduced by the Plaintiff (TN Logistics) would be to allow the Plaintiff (TN Logistics) to claim for more than what it was entitled to, which is plainly wrong. The Federal Court in SPM Membrane Switch Sdn Bhd v. Kerajaan Negeri Selangor [2016] 1 CLJ 177 had occasion to deal with this point when it held that: "However, we do not approve of the appellant's method of calculation for the loss of profits...This calculation does not reflect the principles of compensation for loss of profits and will put the appellant in a position well beyond that which it would rightfully be in, had the contract been properly performed. A calculation based on "commissions", that is to say receipts, is very different from a calculation based on "profits'. To award damages based on commissions would completely disregard the fact that had the contract been properly performed the appellant would have had to incur expenses and costs of operation, among other things. The proper sum should therefore be net of all the expenses that would be reasonable 23 incurred in the remaining 20 month period. To do otherwise would give the appellant more than they would have obtained had the contract been performed, and therefore more than what they rightfully deserved."

It is also to be observed that in making its claim for loss of profits, the Plaintiff (TN Logistics) had produced a sheet of paper (See CB Vol 3 page 503) known as “Lay Hong Billing summary" in the sum of RM1,555,675.14. This sheet of paper is unsigned. There were no primary documents or audited accounts produced by the Plaintiff (TN Logistics) to prove the facts and the amount of the stated sum as loss of profits. Nevertheless, this was accepted by the learned JC as adequate proof of damages for the claim in loss of profits. Edgar Joseph J (as he then was) in his judgment in Popular Industries Ltd v. Eastern Garment Manufacturing Sdn Bhd [1990] 2 CLJ Rep 635; [1990] 1 CLJ 133; [1989] 3 MLJ 360 which has since been adopted by the Court of Appeal and Federal Court observed that this is not the appropriate method in proving of damages when he said the following at pages 366-369: "I now turn to consider the crucial question: have the plaintiffs proved their claim for damages as alleged or at all? With regard 24 to this part of the case, I would preface what I have to say by referring to certain well-established principles. It is axiomatic that a plaintiff seeking substantial damages has the burden of proving both the fact and the amount of damages before he can recover. If he proves neither, the action will fail or he may be awarded only nominal damages upon proof of the contravention of a right. Thus nominal damages may be awarded in all cases of breach (see Marzetti v. William ). And, where damage is shown but its amount is not proved sufficiently or at all, the court will usually decree nominal damages."

In Popular Industries Ltd v. Eastern Garment Manufacturing Sdn Bhd (supra), the Chartered Accountant who was called as a witness to prove the fact of damages, produced a sheet of calculations, P76 which was to show the estimated losses suffered by the plaintiffs therein due to the non delivery by the defendant of the goods. This method of calculation without any independent evidence was not approved by the Courts as enunciated by Lord Goddard in Bornham-Carter v. Hyde Park Hotel [1948] WN 89: Plaintiffs must understand that if they bring actions for damages it is for them to prove their damage; it is not enough to write 25 down the particulars, and so to speak, throw them at the head of the court, saying. "This is what I have lost, I ask you go give me these damages". They have to prove it."

This method of calculation by using a sheet of paper consisting of summaries of billings without more has been repeatedly rejected by our courts. (See Sony Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007] 1 CLJ 611; [2007] 2 MLJ 229: Wasal Construction Sdn Bhd v. Boh Huat Chan Timber Products Sdn Bhd [2013] 1 LNS 1269; [2014] 4 MLJ 294).

The Supreme Court case of KPM Khidmat Sdn Bhd v. Tey Kim Suie [1994] 3 CLJ 1; [1994] 2 MLJ 627 established the rule of evidence that "when documentary evidence is tendered, primary evidence of the said document must be adduced except in cases under section 65 of the Evidence Act 1950.

PW 2 in his evidence admitted that the “Lay Hong Billing Summary" from January 2008 - March 2009 (page 503 CB 3) was produced as proof of total sum of RM1,555,675.14 and that he was not the maker of such summary.

Balance Sheets or Summary of Billings do not by themselves prove the facts stated therein. It has to be proven like any other 26 fact, be it affidavit or otherwise. The facts as stated in the Summary of Billings are mere statements and it cannot be taken as proving that the statements are correct. It has to be proved by calling the maker to explain the facts and the basis of the calculation of the amount which is being claimed. In our present case, no evidence of the basis of the summary of the billings was adduced.

In the upshot, in proving damages, real or factual evidence must be adduced as opposed to mere summaries or general estimations and conclusions before a party can succeed in its claim.” (emphasis added) [51] There is also no basis for saying that the Defendant had failed to rectify the air-conditioning problem in the Hotel rooms resulting in the rooms not being available for guests to use. There is no written notice to the Defendant setting out the rectification works that are required to be done and rooms and floors where these works have to be done. [52] The Plaintiff said that a lot of guests had complained of the air-conditioning not being cold enough. If that be so one would have expected the Plaintiff to produce the complaint form or at least the Job Sheet form duly filled up by the maintenance staff attending to the problem or some 27 contemporaneous reports of the maintenance team. None of these were produced and so what we have is the Plaintiff’s mere “say so”. That falls below the proof that is required on a balance of probabilities. [53] The only written complaint of air-conditioning being not being cold enough was made only in October 2010 some 10 months after the completion of the M&E works and it was only at Level 9. This was admitted by the Manager of the Plaintiff PW 1 in Q&A 111 at page 49 NOE. [54] The Defendant had duly attended to it and the readings taken of the temperature showed that the problem had been rectified. The representative of the company that manages the Hotel, TCY, had also signed off on the “Air Conditioning Testing Sheet”. The Discharge Temperature and Room Temperature of all the 24 Rooms on Level 9 of the Hotel were tabulated to indicate that the problems had been rectified. After that incident there has been no other complaints that the Plaintiff could produce in writing. [55] If indeed the Plaintiff had to attend to the air conditioning problem by calling outside contractors to attend to the problem, there would have been invoices and receipts of payments made for the repairs for it was alleged that the air conditioning problem was not just the 9th floors but other floors as well affecting a few hundred rooms! 28 [56] None of these were produced and the Plaintiff has stopped claiming for the period after 2010 signifying that whatever problems were there, they had all been attended so. [57] As the Defect Liability Period is 18 months from the date of completion of the whole of the M&E Works, one would have expected any problems with the Works to be put in writing to the Defendant and if the Defendant did not attend to it, then the Plaintiff would proceed to engage third party contractors and deduct the costs from the 5% retention sum. [58] At any rate there was no 100% occupancy of those rooms available to guests if one goes by the Plaintiff’s own summary and that certainly does not justify a claim against the Defendant for the loss of the Room Charges when in any event the Plaintiff’s own evidence was that even the available rooms were not fully occupied. [59] This is also not a case where it would be justified to claim for loss of profits from 1.12.2009 to date of opening on 16.1.2010 for it is only too obvious that after the completion of the renovation works there is the need to furnish the rooms and to complete the Interior Design works and some time to get the staffing, marketing and promotion done. 29 Whether the Defendant had proved its Counterclaim on a balance of probabilities [60] I am satisfied that the Contract was a provisional sum Contract for its terms read as follows: “All Quantities Indicated are provisional only. Tenderers (ie the Defendant) is to determine at site the actual dimensions and site conditions and price accordingly.” It was tendered as such by the Claimant in their Tender Documents that included the Schedule of Tender Price and the Summary of Prices dated 27.8.2009 and 31.8.2009 respectively and which were incorporated by the Plaintiff in the Confirmation Letter dated 1.9.2009 that formed the Contract between the parties. See pages 1-15 of Defendant’s Core Bundle. [61] The meaning of a “provisional sum Contract” has been explained in Midland Expressway Ltd v Carillon Construction Ltd and other [2006] EWCA Civ 936 : Vol. 107 Con L.R 235 May L.J said at page 936 para 1: “The term provisional sum is generally well understood in the construction industry. It is used in pricing construction contracts to refer either to work which is truly provisional, in the sense that it may or may not be carried out at all, or to work whose content is undefined 30 so that the parties decide not to try price it accurately when they enter into their contract. A provisional sum is usually included as a round figure guess. It is included mathematically in the original contract price but the parties do not expect the initial round figure to be paid without adjustment. The contract usually provides expressly how it is to be dealt with. A common clause in substance provides for the provisional sum to be omitted and an appropriate valuation of the work actually carried out to be substituted for....but its precise meaning and effect depends on the terms of the individual contract.” [62] As to the mechanics of final price determination it was further held as follows:

A provisional sum is by definition a sum provided in a building contract in respect of work which cannot be sufficiently defined or properly evaluated at the time when the contract is executed. In practice a provisional sum is generally the best guess that can be made at the time. It is "provisional" because neither party is held to that figure, if the actual cost turns out to be higher or lower. 31

It is a necessary feature of the provisional sum mechanism that when the actual value of the work in question is identified and added to the contract price, the provisionally estimated value is deducted. If the provisional value is not deducted: (a) the whole system breaks down; (b) the contractor is paid twice over and;

the provisional sum loses its provisional quality, the so-called provisional sum becomes a fixed and definite sum which the contractor sum is bound to receive in any event (even if he does nothing to earn it)..." [63] Thus the provisional sum is a guesstimate and at best an estimate and the final sum has to be ascertained and accurately determined based on an assessment and evaluation of work done by way of measurement where quantities of work is concerned. The M&E Consultant, JPK & Associates had recommended to the Plaintiff in the Statement of Final Account dated 11.6.2010 at page 28 of the Defendant’s Bundle of Documents with the details of the Statement of Final Account from pages 30-82. The recommended Final Account Sum was RM9,624,049.54. It was made up of the following:

1.0 Original Contract Sum RM10,013,525.20 2.0 Revised Contract Sum RM 8,744,286.70 32 3.0 Net Variation Order No.1-3 RM 879,762.84 RM 9,624.049.54 [64] It is too late in the day for the Plaintiff to assert that the Variation Orders were not authorized. The M&E Consultant is deemed to be the Plaintiff’s agent at the site where the M&E Works are concerned. As provided for in Clause 6d) of the Confirmation Letter the M&E Consultant shall approve all other works relating to M&E scope of works. The justification for the variation works are as set out at pages 32-33 and in particular pages 34-36 of the Defendant’s Core Bundle of Documents. As can be seen the M&E Consultant did not approve the sum as claimed by the Defendant but did its own verification and recommended for a reduced amount from RM10,013,525.20 to a revised reduced sum of RM8,744,286.70 and the VOs claimed of RM1,002,569.45 to RM879,762.84. [65] However still no payment was made and so there was another meeting held involving the Plaintiff, Defendant and the M&E Consultant where it was agreed that the M&E Consultant would come up with a revised payment certificate assessing the value of the Defendant’s work with the omission of the sum verified by the Consultant with respect to the air-conditioning system. The Defendant 33 acceded to it so that payment long outstanding may be effected to them. [66] The M&E Consultant came up with Progress Payment Interim Certificate No.3 or PPIC/3 dated 27.8.2019 made in favour of the Defendant and addressed to the Plaintiff for the sum of RM6,320,860.81 at page 83-85 of the Defendant’s Core Bundle of Documents. [67] Again there was no payment forthcoming and so the Architect PW 4 Kevin Woo Thin Fook had a meeting with the Defendant on 1.10.2010 at the request of the Plaintiff to resolve the impasse. In the letter dated 4.10.2010 from the Architect, KW Associate Architect Sdn Bhd to the Plaintiff and copied to the Defendant, it was recorded that they had informed the Defendant that Level 9 was ready to be handed over for the purpose of testing and commissioning of the air-conditioning system. It was also recorded that at the meeting held on 1.10.2010 the Defendant had pleaded that the latest certification of payment by JPK & Associates be released and remitted in good faith for work done to-date then. 34 [68] What is of critical importance is what was recorded at paragraph 3.0 of the said letter at page 87 of the Defendant’s Core Bundle of Documents as follows: “Value of Work Done - Independent Audit.

CSSB purposed (sic) a meeting be held with the independent auditor to peruse the element breakdown and details of the M&E, in order to derive at a fair and equitable contract sum (revised, if any).

In the absence of an agreement, an independent Quantity Surveyor will be nominated by the Architect (as an independent and disinterested party) and appointed to carry out an independent audit of the value of work done to-date.

The fee of such appointment shall be agreed by both parties and it is, both mandatory and essential that the parties agree to abide by the decision of the independent QS be final and binding in the interest of finality of the issues at hand.

KWAA to propose names of Independent Quantity Surveyor within the next 7 days.” (emphasis added) 35 [69] There is no suggestion by either the Plaintiff or the Defendant that the above does not accurately record the agreement of the parties. Though there was some initial dissatisfaction arising chiefly out of further delay to payment, I am quite satisfied that the Defendant did not protest to this mode of resolving the dispute of the rates and the quantities of the M&E works were concerned and finally went along with it, albeit reluctantly and not so cooperatively and participatively at times. [70] This can be seen in the Architect’s letter to the Plaintiff dated 9.3.2012 on the failure expressed by the Architect PW 4 to get the Defendant to agree to a settlement to obviate the need for the appointment of an independent Quantity Surveyor. This letter was copied to the Defendant. [71] Finally the Plaintiff responded to one of the 2 names proposed by the Architect as the Independent Quantity Surveyor in KW Hinds Bluncian Sdn Bhd (“KWHB”). The Architect duly informed the Defendant by their letter of 9.9.2011 at page 807 Tab S of the Plaintiff’s Bundle of Documents. [72] I appreciate that the Defendant had initially contended that the Contract was a Lump Sum Contract as the Plaintiff had asked for a 36 negotiated price of less 3% for all quotes items. Even assuming for a moment that it might have been a Lump Sum Contract, the conduct of the Defendant in agreeing to the M&E Consultant evaluating and assessing the value of work done and now agreeing to an independent Quantity Surveyor to evaluate and assess the M&E Works done would supersede all previous contractual agreements where the rates and quantities are concerned with respect to the actual work done plus Variation Orders. [73] I have scrutinized the “Final Account Analysis Report on the M&E Works Done” prepared by KWHB at pages 90-115 of the Defendant’s Core Bundle of Documents. I must say it is very detailed setting out each measurement and the rates used and the justification for using the rates. [74] PW 1, Mr Tan Wee Lee, the Manager or more effectively the CEO of the Plaintiff, testified in A 30.1(page 27 NOE) the following: “The actual value if works by the Defendant is only about RM7,091,774.80 and we have paid them RM4,857,863.00 leaving a balance of about RM2,233,911.80. [75] The Report of KWHB states categorically and clearly the value of the M&E Works done to be RM7,091,744.80 and after 37 deducting the amount paid of RM4,857,863.00 there is a balance sum of RM2,233,881.80. [76] Both parties are bound by this valuation done by KWHB as agreed by both of them before the valuation was conducted. They are both estopped from denying the same and having examined the Report of KWHB I have no good reason to reject it, based as it is on reasonable valuation of acceptable and accepted rates in the market. Pronouncement [77] For the reasons given above I had dismissed the Plaintiff’s claim for loss of Room Charges as claimed in the Amended Statement of Claim and allowed the Defendant’s Counterclaim of RM2,233,911.80. The above shall carry interest at the rate of 5% per annum from date of filing of Counterclaim i.e. from 14.6.2011 to date of realization. [78] After hearing parties on costs the Court allowed costs of RM120,000.00 to be paid by Plaintiff to Defendant. Date: 15 September 2017 - signed - Y.A. LEE SWEE SENG Judge Construction Court Kuala Lumpur 38 For the Plaintiff : Jacob Goldie Messrs Jacob Goldie S. S. Chew For the Defendant : Ringo Low and Ting Lee Ping Messrs Ringo Low & Associates Date of decision: 28 April 2017