Tropical Profile (M) Sdn Bhd v Nuri Cergas Sdn Bhd (B-02(NCVC)(W)-372-02/2018)

This is an appeal by the Appellant against the decision of the learned trial Judge, given on 9.2.2018 after a full trial, in dismissing the Appellant’s claim against the Respondent and in allowing the Respondent’s Counter-claim against the Appellant.

The Appellant is the Plaintiff and the Respondent is the Defendant in the High Court Suit. They will be referred to as in the High Court Suit.

It is regrettable that we do not have the benefit of the written grounds of judgment and the learned trial Judge had since retired. Pursuant to s. 69 of the Court of Judicature Act 1964, we heard this appeal by way of rehearing and our decision will be based on our analysis of the evidence on the record. Background facts 4. The case is about a construction claim. The Plaintiff who was a sub-contractor is claiming against the Defendant (the main contractor) for the release of the retention sum in RM1,198,320.53 and payment of variation of price in the sum of RM595,373.52. The Defendant withheld the retention sum on the ground that there has been a breach of contractual obligation by the Plaintiff and delay in completion of the project on the scheduled time.

The undisputed facts of the case show that the Defendant was engaged by the Jabatan Kerja Raya [“JKR”] for a project known as “Menyiapkan Kerja-Kerja Menaiktarak Persimpangan Di Bandar Sultan Sulaiman/Pintu 2 Northport Pelabuhan Kelang, Selangor.” [“the Project”]. 3

The Defendant then engaged the Plaintiff as its sub-contractor by way of the Letter of Award [“LOA”] dated 1.8.2011.

7.

The JKR had upon application by the Defendant extended the date of completion of the Project from 16.3.2013 to 14.5.2014.

9.

The actual completion date of the Project was 16.3.2016, which was 267 days after the scheduled date of completion, but two months before the extended completion date.

The Defendant issued the Certificate of Practical Completion [“CPC”] on 9.7.2014 and the Defect Liability Period ended on 2.7.2015.

It is the Plaintiff’s case that the Defendant shall release the retention sum of RM1,198,320.53 for the reasons that the CPC had been issued on 9.7.2014 and the Defect Liability Period had since expired on 2.7.2015.

The Defendant justified the withholding of the retention sum on the ground that the Plaintiff had breached its contractual obligation in failing to furnish the amended as-built drawings and expansion warranty certificate. 1 Page 472 Jilid 3 RR / Tab C Appellant’s core bundle. 4

The Defendant Counter-claimed for RM1,541,400.00 being the liquidated ascertained damages [“LAD”] for the 267 days delay in completing the sub-contract works before the Schedule date. The Issues for Appeal 15. There are three issues for determination in this appeal. a. Whether the Defendant is entitled to withhold the retention sum [“Retention Sum Issue”]; b. Whether the Defendant is entitled to the variation of price and Preliminaries and Preliminaries (Overhead) [“ Variation of Price Issue”]. c. Whether the Defendant is entitled to the LAD. Retention Sum Issue 16. Learned counsel for the Defendant submitted that pursuant to paragraph 1.2 of the Surat Arahan KPKR Bilangan 8/20092 issued by JKR, the as-built drawings and expansion warranty certificate [also referred to as “Sijil Jaminan Expansion Joint”] were among others the main documents to be submitted together with completion submission of the Project.

It was submitted that the Plaintiff’s sole witness, PW1, admitted in cross-examination that the plaintiff was aware of its contractual obligation to submit to the Defendant the as-built drawings and expansion warranty certificate for approval by JKR. 2 Page 366 of ROAD-2. 5

Yet, as submitted learned counsel for the Defendant, the Plaintiff refused, after its original as-built drawings were rejected by JKR, to re-submit the amended as-built drawings as commented by the JKR despite the Defendant’s written request by way of the letter dated 31.10.2014 3. The Defendant had clearly warned in the said letter that the retention sum would be withheld until the as-built drawings had been re-submitted. It was submitted that until today, the Plaintiff is still in breach of its contractual obligation by failing to re-submit the amended as-built drawings.

It is our considered view that the Defendant is not entitled to withhold the retention sum merely because the Plaintiff had not re-submitted the amended as-built drawings.

Learned counsel for the Plaintiff had drawn our attention to Clause 15(c) of the LOA, which allows the Defendant to engage a third party to complete any part of the works which the Plaintiff failed to comply. Clause 15(c) states:

OMISSIONS DUE TO DEFAULT If in the opinion of Nuri Cergas Sdn Bhd, it would be more expedient to omit a part of the Sub-Contract Works, due to you if you are:

[…]

[…]

Not complying or carrying out the instruction of the Project

[…] 3 Tab J Appellant’s Core Bundle. 6 Then Nuri Cergas Sdn Bhd may in writing instruct that such parts of the Sub-Contract Works are omitted entirely from the Sub-Contract, and the Sub-Contract Sum shall be adjusted accordingly. Nuri Cergas Sdn Bhd reserves the right to re-award such omitted works to other contractors or carry out and complete the same by itself. Without prejudice to Nuri Cergas Sdn Bhd’s other rights or remedies, the cost of re-awarding the omitted works and the costs of carrying out of completing the same (including such indirect and consequential losses) shall be recoverable from Sun-Contractor and all cost plus a Management Fee of five percent (5%) shall be charged to your account.

21.

In the circumstance, we find that the Plaintiff having breached its contractual duties, the Defendant is entitled to set off the sum of RM5000.00 it paid to the third party who prepared the amended as-built drawings. Variation of Price Issue 4 Tab N, Appellant’s Core Bundle. 7

Learned counsel for the Plaintiff submitted that the price of materials had increased and the Plaintiff requested for variation of price. In this connection, the Plaintiff’s representatives and the Defendant’s representatives had meetings on 7.1.2014 and 10.1.2014 on this issue whereby the Defendant sought from the Plaintiff data according to the monthly price variation issued by the Statistic Department to verify and support the Plaintiffs claim for variation of price.

Vide the letter dated 20.1.2014 5, the Plaintiff submitted to the Defendant the claim for variation of price in the sum of RM320,548.93 together with the comprehensive data as requested. The Defendant went silent.

This was followed by a final claim dated 31.3.2014 6 in the sum of RM320,548.90 for variation of price and RM274,824.54 for the Preliminaries (Overhead).

Having received no reply from the Defendant to the Plaintiff’s variation of price claim, the Plaintiff wrote on 24.4.2014 7. Again, there was no reply from the Defendant.

Learned counsel for the Plaintiff submitted that it is the contractual duty of the Defendant as the main contractor to forward the Plaintiff’s claim for variation of price to JKR for its approval under Clause 4 of the LOA.

Further, in the construction industry, business efficacy demands that the sub-contractor must be informed whether its claim has been admitted or 5 Tab O, Appellant’s Core Bundle. 6 Tab P Appellant’s core bundle. 7 Page 958 Jilid 5/ Tab T Appellant’s core bundle. 8 denied by JKR. The main contractor cannot remain silent when demands are made.

Learned counsel for the Plaintiff submitted that the Defendant bears the burden to prove that the Plaintiff’s claim for variation of price had been rejected by the JKR and there was no evidence that the JKR had rejected such claim by the Plaintiff. It was submitted that the Defendant could have produced JKR’s Final Accounts Certificate to show what claims had been made but such was never produced by the Defendant. Accordingly, adverse inference can be drawn that JKR had paid the Plaintiff’s claim for variation of price and preliminary but the Defendant pocketed the money.

Clause 4 “BILL OF QUANTITIES” provides as follows:

BILL OF QUANTITIES b) The rates in your Sub-Contract set against each item in the Bill of Quantities shall be held to include for the provision of all requirements under the Main Contract Specifications and the Drawings, all labour, materials, conveyance and delivery, unloading, storing, protecting, consumable (diesel, electricity, water, etc.) hoisting, setting and fixing in position, use of all tools, plants and machinery, nights works, safety measure and precautions, all duties and taxes where applicable, establishment charges, royalties, profit, attendance and all other labour and everything else necessary for the due and proper completion of each item. c) The Rates and Contract Sum shall be deem to include all your direct and indirect cost including Preliminaries and Overhead Cost required for the full completion on the work. 9 All rates in the Bill shall remain fixed and valid throughout your Sub-Contract (if any) granted by Nuri Cergas Sdn Bhd. The rates shall also deem to include any idling and/or standing time of plant machinery and labour caused by your selves and/or Nuri Cergas Sdn Bhd. d) No fluctuation/variation of price for materials, labour and equipment shall be allowed for in this Sub-Contract unless The Main Contractor (NCSB) obtained the same from The

Clauses 4(b) (c) and (d) of the LOA clearly states that the contractual sum for this sub-contract was inclusive of any Preliminaries (Overhead) and no separate claims for the same shall be allowed for under the sub-contract, and that no fluctuation/variation of price shall be allowed under the sub-contract unless the Defendant obtained the same from JKR.

PW1 admitted in cross-examination 8 that the Plaintiff was at all material times aware of the effect of Clause 4(b)(c) and (d) of the LOA, that is, the plaintiff is contractually prohibited from claiming any fluctuation or variation of price, unless the Defendant obtained the same from JKR. However, PW1 admitted that there were no documents in the bundles showing that the Defendant had obtained any variation of price from JKR.

We are unable to agree with learned counsel for Plaintiff’s submission that the burden is upon the Defendant to prove that it has obtained the variation of price from JKR. 8 Page 91 to 92 of ROA-1, pages 38-39, 40-41, and 43 notes of proceedings dated 28.9.2017 10

Ss. 101(1), 102 and 103 of the Evidence Act 1950 provides that the burden of proof rests upon the person who makes the assertion and who wants the court to give the judgment. Since the Plaintiff is claiming for variation of price and preliminaries [Overhead], it is incumbent upon the Plaintiff to prove that the Defendant had obtained the variation of price from JKR but refused to pay the Plaintiff.

In this connection, the Plaintiff could have called JKR to give evidence in the trial and to request for production of the Final Account Certificate during the discovery. In failing to do so, it is mischievous of the Plaintiff to cast to cast unsubstantiated aspersion on the Defendant.

In our considered view, the Plaintiff has failed to prove on the balance of probability the claim for variation of price and preliminary (overhead). Counter-Claim of the Defendant LAD Issue 37. Learned counsel for the Plaintiff submitted that Clause 6(g) of the LOA provided that “all claim and payment is based on back to back”. This means that if JKR imposed a claim of LAD on the Defendant, that claim is passed to the Plaintiff. If the JKR did not impose any LAD, then under the back-to-back arrangement the Defendant cannot impose LAD on the Plaintiff. It is in evidence that JKR had granted an extension of time to the Defendant from 16.3.2013 to 14.5.2014 and that the Plaintiff had completed the Project two months ahead of the extended completion period. Since JKR did not impose any LAD on the Defendant, the Defendant should not impose LAD on the Plaintiff. 11

On the other hand, learned counsel for the Defendant submitted that Section 2 of the LOA clearly stated that any extension of time shall be approved and granted by the Defendant only and no one else. Since no extension of time had been granted by the Defendant to the Plaintiff and the Plaintiff failed to prove that the Defendant had approved the Plaintiff’s application for extension of time, it cannot be said that the Plaintiff had been grated extension of time by the Defendant simply because JKR had granted extension of time to the Defendant.

Learned Counsel for the Defendant submitted that the Plaintiff applied for 511 days extension from 17.3.20139. Whereas the extension granted by the JKR was not for that period of time. Based on JKR’s letter dated 28.2.2013 10, JKR granted the extension from 16.9.2013 to 14.5.2014, which is definitely not 511 days.

It was submitted that the Plaintiff was not the only sub-contractor for this Project. The agreement was between the Defendant and JKR and Defendant sub-contracted one aspect of the project works to the Plaintiff. The fact that JKR had granted extension of time to the Defendant cannot be tied in with the scheduled time on which the Plaintiff should finish its sub-contract works.

Clause 1 (a) “SCOPE OF WORKS” of the LOA states: The Scope of work in this Sub-contract shall include for the supply of all material, plant and machinery, manpower and everything necessary for the Construction and Completion of BRIDGE WORKS as in the Main Contract between JKR MALAYSIA 9 Tab C, Appellant’s Core Bundle. 10 Tab D, Appellant’s Core Bundle. 12 (Employer) and NURI CERGAS SDN BHD (Main Contractor). Setting out for the work shall done by you and deemed to be included in your sub-contract sum.

A close perusal of Clause 1 (a) of the LOA amply shows that the scope of works sub-contracted to the Plaintiff covered the whole Project, which is construction and completion of the Bridge as in the Main Contract between JKR and the Defendant.

By reason that JKR had granted an extension of time to the Defendant for the completion of the Project from 16.3.2013 to 14.5.2014, it is logical that the scheduled completion date stated in Clause 3 (b) should likewise be extended.

It is therefore abundantly clear that there is no delay as the Plaintiff completed the works two months before the extended completion date granted by JKR. As such there was no factual basis upon which LAD may be granted notwithstanding the fact that the defendant did not grant the approval for the extension of time to the plaintiff.

Accordingly, we find that the Defendant has not proven its Counter-claim on the balance of probability. Conclusion 46. Based on all the reasons aforesaid, it is our Unanimous decision: a. The Plaintiff’s claim for retention sum is allowed subject to the deduction of RM5000.00 being the costs paid by the Defendant to the third party. Order of the High Court is set aside. 13 b. The claim on variation on price is disallowed. The order of the High Court is affirmed. c. The LAD should not be granted. Order of High Court on the LAD is set aside.

The appeal is therefore allowed in part. Parties to bear their costs. The High Court’s order on cost is also set aside. Dated: 24 July 2019 Sgd YEW JEN KIE (delivering judgment of the court) Court of Appeal Judge Putrajaya Counsel For : WALTER PEREIRA & IZYAN DARLIA BALIA The Appellants YUSOF [KAMARUDDIN & PARTNERS] Counsel For : DATO’ RABINDER SINGH & JOYNA ANG LI CHI The Respondents [RABINDER BUDIMAN & ASSOCIATES] Notice: This copy of the court’s reasons for judgment is subject to editorial revision.