Usima Sdn Bhd v Lee Hor Fong (02-66-10/2015(K))

8.13 In the absence of any provision to the contrary, the sum certified in an interim certificate is thus taken to be an estimate of the value of the work done up to the date shown in the certificate. Thus, while the employer or owner is obliged to pay what is certified, the amount certified is not binding on the parties and may be adjusted upon the completion of the works.” [21] Speaking on the same subject matter, Keating on Construction Contracts by Stephen Furst 8th Edition London Sweet and Maxwell, 2006 at page 139 says: “Interim certificates are thus approximate estimates, made in some instances for the purpose of determining whether the employer is safe in making a payment in advance of the contract sum, in others whether he is under a duty to pay an instalment and, if so, how much he is to pay. A contractual 10 right to receive payments for the value of work done and materials supplied arises not upon the work being done but upon the issue of the interim certificate in respect of such work and materials. Such certificate are not normally binding upon the parties as to quality or amount and are subject to adjustment on completion. They have been described as having “provisional validity” or being “provisional estimates of the sum to which the contractor is entitled by way of instalment payments”. The sum certified is not the true final value of the work done and materials supplied but what in the opinion of the engineer is due on the basis of the monthly statements.” [22] In the House of Lords’ case of The Tharsis Sulphur And Copper Company V. M’Elroy & Sons and Others (1878) 3 App. Cas 1040 HL Lord Cairns, LC at page 1045 had referred to what the parties called as engineers certificate issued from time to time authorizing interim payments as: “The certificates I look upon as simply a statement of a matter of fact, namely, what was the weight and what was the contract price of the materials actually delivered from time to time upon the ground, and the payments made under those certificates were altogether provisional, and subject to adjustment or to re-adjustment at the end of the contract.” [23] The English Court of Appeal in Henry Boot Construction Ltd v. Alstom Combined Cycles Ltd (2005) 3 ALL ER 932 ruled that interim certificates were no more than provisional estimates of the sum to which the claimant was entitled by way of instalment payments. At the final stage, the claimant and the engineer had to perform a very different exercise and it would be an integral part of the final certificate that it 11 would contain the engineer’s statement of the contract price ascertained by him after considering the final account, as detailed supporting documentation and all information reasonably required by him for its certification. [24] The issues that arose in the said case were (i) whether the claimant’s right to receive payments for the value of work done and materials supplied arose upon the work being done and materials supplied, or only upon the issue of a certificate (ii) if it only arose upon the issue of a certificate, whether it arose once and for all as soon as the claimant was entitled to have the sum certified in an interim certificate, or whether the claimant had a continuing right to have the sum certificated in subsequent certificates, and in particular the final certificate. [25] On the issue of re-measurement, suffice it to state that a contract containing quotations in which the sum finally due to the contractor is to be ascertained by recalculating each stated quantity from the actual amount of work performed, is referred to as re-measurement contract (Chitty on Contracts Volume II Specific Contracts 30th Edition). 12 [26] At the outset, it is worth reminding that parties had agreed at the trial stage that the contract is subject to re-measurement. Reading exhibit P11, we are of the considered view that the application of the main contract agreement to the subcontract was made at the request or rather on the suggestion of Usima. LHF accepted and agreed to the same as evinced by the signature of Lee Hor Fong in his capacity as a Director of Pembinaan L.H. Fong. Exhibit P11 states that the condition of the main contract including addendums and appendices attached thereto, specification preambles and methods of measurement shall be deemed to form and be read and construed as part of the subcontract. Exhibit P11 is a letter of award to LHF dated 5.11.2002. [27] We find the Court of Appeal was right in concluding at page 6 of its judgment which states “the main contract was applicable because the letter of award dated 5.11.2002 appointing the appellant to execute and complete the contract expressly provided for the main contract to be part of the contract between the appellant and the respondent.” [28] A perusal of the relevant clauses of the main contract and the Preamble to Bill of Quantities fortifies Usima’s contention on the issue. Clause 25 of the main contract captioned ‘Ukuran dan Penilaian Kerja Termasuk Perubahan’ in sub clause (c) provides: 13 “Di mana kuantiti kerja atau sebahagian daripadanya dinyatakan sebagai “sementara” dalam Senarai Kuantiti, amaun yang akan dibayar kepada Kontraktor berkenaan dengan Kerja tersebut atau sebahagian daripadanya apabila Kontrak ini disiapkan hendaklah ditentukan dengan mengukur semula dan menilai ke atas Kerja termasuk apa-apa perubahan yang dibenarkan atau disahkan kemudiannya oleh P.P. secara bertulis di bawah Fasal 24 Syarat-syarat ini, sebagaimana ianya dilaksanakan sebenarnya. Penilaian pengukuran semula kerja tersebut termasuk apa-apa perubahan hendaklah mengikut kaedah-kaedah (i) dan (ii) subfasal (b) di atas.” (emphasis added) [29] Further, clause 26(c) on quantities states: “(c) Sekiranya kuantiti dinyatakan sebagai “sementara”, kuantiti tersebut adalah menjadi kuantiti anggaran kerja tersebut tetapi ianya tidak akan diambil kira sebagai kuantiti yang benar atau tepat bagi Kerja yang akan dilaksanakan oleh Kontrak ini.” (emphasis added) [30] Consistent with a re-measurement contract, clause 47 of the main contract deals with the issue of payment and interim certificate. Sparing the need to reproduce the entirety of the said clause, it is crucial to refer to sub clause (c) of the same which reads: “(c) Amaun yang dinyatakan sebagai kena dibayar dalam Perakuan Interim hendaklah, tertakluk kepada apa-apa persetujuan antara pihak-pihak itu mengenai pembayaran secara berperingkat-peringkat, merupakan anggaran jumlah nilai kerja yang dilaksanakan dengan sempurnanya dan tujuh puluh lima (75) peratus daripada nilai bahan dan barang-barang tak pasang yang diserah-hantar ke tempat 14 Kerja atau ke tempat yang bersampingan dengan Kerja yang dicadangkan untuk digunakan di tempat Kerja itu sehingga dan termasuk pada tarikh penilaian itu dibuat, ditolak apa-apa ansuran yang dibayar dahulunya di bawah Syarat ini. Dengan syarat bahawa perakuan itu hendaklah termasuk hanya nilai bahan dan barang-barang tak pasang tersebut seperti dan dari masa ianya diserah-hantar dengan munasabah dan dengan sempurnanya dan tidak terlalu awal, ke tempat Kerja atau ke tempat yang berdampingan dengan Kerja, dan hanya jika dilindungi dengan secukupnya terhadap cuaca, kerosakan dan kemerosotan.” (emphasis added) [31] The status of the interim certificate referred to in clause 47(c) above is never intended to be final and conclusive as envisaged by clause 49 of the main contract which states: “49. KESAN PERAKUAN P.P. Tiada perakuan P.P. di bawah mana-mana peruntukan Kontrak ini boleh disifatkan sebagai keterangan muktamad mengenai kesempurnaan apa-apa kerja, bahan atau barang-barang bagi maksud perakuan itu dan juga tiada perakuan boleh melepaskan Kontraktor daripada liabilitinya untuk meminda dan memperbaiki semua kecacatan, ketidaksempurnaan, kekecutan atau apa-apa jua kerosakan lain sebagaimana diperuntukkan dalam Kontrak ini. Bagaimanapun, perakuan P.P adalah tidak muktamad dan tidak mengikat dalam apa jua pertikaian antara Kerajaan dan Kontraktor jika pertikaian itu dibawa ke hadapan seorang penimbangtara atau ke Mahkamah.” (emphasis added) [32] These clauses, in our view are clear provisions in the contract document indicating and spelling out that the contract being a re-measurement contract. 15 [33] It is the court’s duty to give effect to the bargain of the parties according to their intention and when that bargain is in writing the intention is to be looked for in the words used unless they are such that one may suspect that they do not convey the intention correctly. If those words are clear, there is very little that the court has to do. The court must give effect to the plain meaning of the words however much it may dislike the result. (See: Mulpha Pacific Sdn Bhd. v. Paramount Corp Bhd [2003] 4 MLJ 357) [34] The next question that arises is whether there was or there was no re-measurement done. [35] The learned High Court judge found that the amount claimed by LHF is subject to re-measurement and concluded that on the evidence proffered, there was no re-measurement done. [36] In finding that the interim certificates were subject to re-measurement, the learned High Court judge had merely relied on a piece of SP1’s evidence (Ismail b. Md. Zain). At page 17 of His Lordship’s grounds of judgment, it was stated as follows: 16 “If the Court wrong on its finding that the Defendant was not in breach of its contract with the Plaintiff, then on the amount claim by the Plaintiff would be subjected to re-measurement. In the evidence of SP1 it was put to him: Put: Sebelum JKR keluarkan interim certificate untuk interim 17 apakah prosedurnya? Jawapan: Sebelum keluarkan interim certificate, kebiasaan nya pihak kontraktor dengan pihak JKR akan mengadakan joint measurement bersama untuk kenal pasti nilai. Akan tetapi kuantiti tidak tepat sebab ada setengah kerja tidak siap sepenuhnya.” [37] We note that the above quoted passage was in our view added by the learned High Court judge as a further qualification to his finding that Usima was not in breach of the contract with LHF. It was his additional finding that there was no re-measurement. At the risk of repetition, it must be reiterated that LHF’s claim against Usima failed because the learned High Court judge found LHF had abandoned the construction site. [38] The Court of Appeal however, found that as abandonment was never featured in Usima’s notices to LHF as such notices only referred to delays by LHF in carrying out its work, the learned High Court judge had erred in holding that LHF had abandoned the site. 17 [39] On re-measurement, the Court of Appeal held that the issue of re-measurement did not arise as the interim certificates upon which LHF based its claim had already been measured and certified by the employers’ consultant. At paragraph 7 of its judgment, the Court of Appeal stated: “Finally, the learned trial judge’s finding that the appellant’s claim was subject to re-measurement was plainly wrong because the interim certificates upon which the appellant’s claim were based had already been measured and certified by the employer’s consultant. The evidence relied on by the learned trial judge referred to joint measurement before the issue of the interim certificate. The question of re-measurement, therefore, did not arise. Hence the respondent was clearly in breach of the contract when it purported to terminate the contact by its letter dated 13.01.2003.” (emphasis added) [40] LHF’s claims against Usima is based on interim certificates number 15, 16 and 17. SP1, an engineer in charge and who was the Superintending Officer of the project, stated in his evidence that the certificates were issued by JKR. The certificates show among others, the percentage of work carried out by Usima and up to the issuance of interim certificate no. 17 it shows the value of work done by Usima in the sum of RM6,021,006.95 as at 22.2.2003. The witness further stated that “Kesemua peraturan disokong oleh tuntutan kuantiti atau Bill of Quantity” and “Perakuan ini dibuat bagi mengesyorkan bayaran interim kepada kontraktor.” 18 [41] SP3, a technician under the supervision of SP1 supervised the project. He was on site and prepared the Bill of Quantity. His evidence merely reiterated the evidence of SP1. The evidence of SP2, a senior technician who supervised directly the duties of SP3 in essence also echoed a similar tone with the evidence of SP1 on the preparation and issuance of certificates number 15, 16 and 17. [42] Lee Hor Fong’s (the plaintiff) evidence established that LHF has completed about 61% of the contract work and his claim among others is based on the interim certificates number 15, 16 and 17. [43] We have earlier noted that the learned High Court judge had in the course of the trial when SP1 was giving evidence recorded that the parties had agreed the contract is subject to re-measurement. Beside saying in cross examination that “sebelum keluarkan interim certificate pihak Jabatan Kerja Raya (JKR) akan mengadakan joint measurement bersama untuk kenal pasti nilai akan tetapi quantity tidak tepat sebab ada setengah kerja tidak siap sepenuhnya”, SP1 further stated during re examination that “Ya, sebelum interim certificate dikeluarkan pihak kontraktor akan bersama-sama dengan Jabatan Kerja Raya (JKR) mengadakan joint measurement untuk tentukan quantity dan nilai.” 19 [44] We agree with the conclusion drawn by the Court of Appeal that LHF’s claims were based on the interim certificates which had been jointly measured and certified by Usima and the JKR. In our view, that joint measurement or re-measurement as one may call it, is in respect of work done by LHF on behalf of Usima towards Usima’s obligations under the main contract with JKR. That was the basis and modus operandi of the contract between the parties. Usima has been paid by JKR prior to this by way of and on the basis of other earlier interim certificates. It is an undeniable fact that Usima had relied upon these interim certificates for its claim against JKR. Likewise, LHF had also been correspondingly paid by way of and on the same basis. As the evidence of the witnesses suggest, joint measurement had been done. [45] Learned counsel for Usima contended that only certain clauses of the main contract can have application to the subcontract or rather can be imported into the same. To this end, it was submitted that those clauses of the main contract such as those that relate to the tasks and roles of the superintending officer (which happens to be SP1) cannot be imported and read into the subcontract. We find this argument to be seriously flawed for the reason of the existence of exhibit P11 which we have adverted to earlier. We find not a shred of evidence to controvert exhibit P11. 20 [46] The learned High Court judge was clearly in error in failing to fully appreciate the evidence in concluding that there was no re-measurement done. The evidence presented clearly suggest that the tasks carried out by SP1, SP2 and SP3 in the issuance of the interim certificates involved the process of re-measurement of the subcontract price which had been agreed in the sum of RM9,510,863.51 as stated in exhibit P11. Re-measurement according to the learned author of GT Gajira’s Law Relating to Building and Engineering Contracts in India “more often than not only means re-calculation, and physical measurements or dimension taken on site only occur in relation to work not of its nature subject to calculations of drawings.” [47] An error of this nature on the part of the trial judge merits intervention by the Court of Appeal. No doubt an appellate court will be slow in interfering or disturbing a finding of fact recorded by a trial court but it does not end there. In State of Rajastan v. Hanuman AIR [2001] SC 282, Mohapatra J delivering the judgment of the Supreme Court of India said: “An appellate Court should assess the evidence on record with a view to satisfy itself that the appreciation of evidence by the trial Court is not vitiated on account of any erroneous approach or illegality and it is not palpably erroneous. The sustainability of the judgment depends on the soundness of the reasons given in support of the findings and the conclusion.” 21 [48] It is trite that appellate interference will take place in cases where there has been no or insufficient judicial appreciation of the evidence. (See: Lee Ing Chin & Ors v. Gan Yook Chin & Anor [2003] 2 CLJ 19, Watt or Thomas v. Thomas [1947] AC 484, Chow Yee Wah & Anor v. Choo Ah Pat [1978] 1 LNS 32) [49] On that note, we see no error on the part of the Court of Appeal to have reversed the finding of the learned High Court judge on the issue of re-measurement. [50] Further, in our view it is unconscionable on the part of Usima after having been paid by JKR (the employer) based on the interim certificates to now insist that there should be a “further” re-measurement in respect of the work performed by LHF on its behalf as its subcontractor. Usima is estopped from doing so. The interim certificates were jointly measured by Usima and the Superintending Officer (SP1) from JKR, the employer. Usima must have approved and agreed to the same before being paid by JKR on those certificates. It cannot now say otherwise. One cannot approbate and reprobate. [51] Again, looking back at the contract documents agreed between them and the factual scenario of the case, was it intended by the parties 22 that re-measurement referred to therein means that there will be re-measurement of the work between Usima as the main contractor and JKR and subsequently, there is also the need for another re-measurement of the same contract work between Usima and LHF, the subcontractor? We do not think that was envisaged by the terms of the contract between the parties. [52] For the aforesaid reasons and as explained earlier, interim certificates are merely estimates and are not final. However, on the peculiar facts and circumstances of this case which is a contract subject to re-measurement and based on the finding that measurement had been done before the issuance of the interim certificates as found by the Court of Appeal on its re-evaluation of the evidence, we agree with the submissions of learned counsel for LHF that the answer to questions (ii) and (iii) ought to be in the affirmative. Question (v) [53] Question number (v) arises from the issue of payments made by Usima directly to third parties. It was contended by Usima’s learned counsel that when the Court of Appeal allowed LHF’s appeal and entered judgment for the full amount in interim certificates no. 15, 16 & 17, it had failed to take into account such payments. During the course of the 23 works, payments were made by Usima directly to LHF’s subcontractors (the 3rd parties) and those payments were included in interim certificates number 15, 16 and 17. Those payments were not meant for work done by LHF but by the so called 3rd parties. LHF had thereby been unjustly enriched while Usima had been made to pay twice for the same works. Usima contended those payments must be deducted. [54] In support of its contention, Usima had invoked section 71 of the Contracts Act 1950 which reads: “Obligation of person enjoying benefit of non-gratuitous act

Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.” [55] The scope on the application section 71 of the Contracts Act 1950 was explained by the Privy Council in the case of Siow Wong Fatt v. Susur Rotan Mining Ltd & Anor [1967] 2 MLJ 118 which laid down that four conditions must be satisfied to establish a claim under section 71 of the Contracts (Malay States) Ordinance 1950. [56] A summary of the facts of the case as may be gleaned from the report is reproduced herein verbatim: 24 “ The appellant made discoveries of a few hundred acres of land which gave promise of bearing iron ore. In November 1959 he obtained a prospectors licence and a mining lease was granted to him in 1961. He then formed a company called the Kota Mining Co. Ltd. (hereinafter called “Kota”) and transferred all the benefits and burdens vested in him to the company. By an agreement dated September 19, 1960 Kota transferred its right under the earlier agreements to the first respondent in consideration of $40,000 and a further $40,000.00 was to be paid at a later stage (which was never paid) with a tribute of $2 for every ton raised. Thus by a train of subcontracts the first respondent became entitled as a matter of substance to the benefit of the prospectors licence and a right to a mining sub-lease of the mineral land. The first respondent then as commercial owners of the mining rights constructed a road eight or nine miles long leading to the mineral land. But despite that the first respondent never started to mine the land as it appeared that Kota did not carry out their part of the contract. The first respondent then sued Kota for specific performance of the agreement dated September 19, 1960 and they joined the appellant as a defendant against whom they made a claim for specific performance of an alleged oral agreement. When the case came up before Azmi J., as he then was, counsel 25 for the first respondent announced that the action between his client and Kota had been settled so that the action proceeded between the first respondent and the appellant, and Azmi J. held that there was no oral agreement as alleged and dismissed the action. The first respondent then appealed to the Federal Court who found against the first respondent upon the alleged oral agreement but in its favour under section 71 of the Contracts (Malay States) Ordinance and directed an inquiry as to the sum to which the first respondent was thereby entitled ([1965] 2 MLJ 45). On appeal to the Privy Council, the sole question before their Lordships was whether the Federal Court were right in holding that the first respondent had a valid claim against the appellant under section 71 of the said Ordinance in respect of their expenditure upon the road.” [57] The Privy Council held that for the successful invocation of the said provision, four conditions must be satisfied. Lord Upjohn in delivering the judgment stated: “ It has been common ground before their Lordships that four conditions must be satisfied to establish a claim under section 71. The doing of the act or the delivery of the thing referred to in the section:

B. Thangaraj

Sanjay Mohan Messrs Thangaraj & Associates Advocates and Solicitors Counsel for Respondent:

Gopal Sri Ram

Saw Lip Khai

YC Wong

CK Lim

Chuah Yih Chuan

David Yii Tetuan Chooi Saw & Lim