CEM 583 LAW FOR CONSTRUCTION 2020

Assignment Report Rubric

STUDENT’S INFORMATION
No. STUDENT ID / GROUP NAME TOTAL

1. 2018227552 PEC2217N2 NUR AFIQAH BINTI ZAINUDDIN /30

CO1: Explain and assess the scenario according to the laws, bylaws and regulations relating to the design and
construction of civil engineering works in Malaysia. (C6)
PO3: Ability to design systems, components or processes for solving complex engineering problems that meet
specified needs with appropriate consideration for public health and safety, cultural, societal, and environmental
considerations.

Task Description of Task Marks (%) Total

Task Identify and obtain information related to 0m 1m 2m
1 an infrastructure project in Malaysia from
any sources (developer, contractor, Obtain Obtain Obtain
consultant firm, quantity surveyor firm) (1- unsatisfy satisfy complete
2 pages) informatio informatio informatio
n about n about n about
infrastruct infrastruct infrastruct
ure project ure project ure project
Task Identify and discuss 9 basic elements of
2 the contract in the project: (3-5 pages)
(a) A clear or firm offer or proposal
(b) An acceptance of the 3m 6m 9m
offer/proposal
(c) Intention to create legal Identify Identify Identify
relations and and and
(d) Consideration discuss all discuss all discuss all
(e) Certainty 3 basic 6 basic 9 basic
(f) Capacity elements elements elements
(g) Consent
(h) Legality
(i) Possibility
Task Identify and obtain information related to
3 court case discusses contract-related
cases in the construction industry. The
court cases must be cases heard in one
of the existing courts in Malaysia whether 1m 3m 5m
it is a Magistrate's court, a Session court,
a High court, an Appeal court or a Federal Discuss 1 Discuss 3 Discuss 5
court. Discuss 5 basic information of the basic basic basic
case. (1-2 pages) informatio informatio informatio
n of the n of the n of the
1. Who is the Prosecutor/Judge? Who is case case case
the Defendant?
2. Mistakes Made / Case Facts?
3. The sentence imposed by the Judge
on the offender?
 4. What kind of court for the hearing the
case? (Federal / Appeal / etc.)?
5. Which "Act" did the judge use to refer
the case?
Task Study the facts of the court case and try 3m 6m 9m
4 to compare it to the earlier project.
Discuss the probability/potential of the Compare Compare Compare
case facts re-occurring on the earlier and and and
project (Task 1 and Task 2). Discussion discuss all discuss all discuss all
must be referred to 9 basic elements of 3 basic 6 basic 9 basic
the contract as stated earlier (Task 2). (3- elements elements elements
5 pages)

Task Explore and propose 1m 2m 3m

5 solutions/actions/remedies to prevent the
cases from occurring against in the future. Propose Propose Propose
(2 pages) with their their own with their
own idea idea that own idea
that un- synchroni that
synchroni ze with synchroni
ze with the law ze with
the law and basic the law
justificatio and good
n justificatio
n
Task Conclusion (1 page) 0m 0.5 m 1m
6
Not cover Cover half Cover the
the case of the whole
study case case
study study
Task References & Appendices 0m 0.5 m 1m
7
(Attach the court case) No Attach Attach
references basic proper
related to references references
the case related to related to
study the case the case
study study

30 marks
 INDIVIDUAL ASSIGNMENT

LAW FOR CONSTRUCTION

CEM583

NAME : NUR AFIQAH BINTI ZAINUDDIN

STUDENT ID : 2018227552

FACULTY : CIVIL ENGINEERING (EC221)

CLASS : PEC2217

LECTURER : KHAIRUL AMMAR MUHAMMAD ALI

ACKNOWLEDGMENT

ABSTRACT

1.0 PROJECT DESCRIPTION

1.1 Project Detail
1.2 Stakeholders

2.0 ELEMENT IN CONTRACT DOCUMENT

2.1 A clear or firm offer or proposal
2.2 An acceptance of the offer/proposal
2.3 Intention to create legal relations
2.4 Consideration
2.5 Certainty
2.6 Capacity
2.7 Consent
2.8 Legality
2.9 Possibility

3.0 RELATED COURT CASE

3.1 Detail of Case
3.2 Case Facts
3.3 Sentence Imposed
3.4 Court Involve
3.5 Reference of Case

4.0 DISCUSSION
5.0 REMEDIES
6.0 CONCLUSION
7.0 REFERENCES & APPENDICES
 ACKNOWLEDGEMENT

Bismillahirrahmanirrahim,

In the name of Allah, the most gracious and most merciful. He grants on me
knowledge, a healthy body and piece mind to complete this individual assignment of Law
for Construction (CEM583). A special thank you to both of my parents, En Zainuddin and
Pn Zaizuriah for providing all necessary tools to ease the completion of this report.

I would like to thanks to my lecturer, En Khairul Ammar for giving his best to
help us in completing this report. I am very honoured to be a student of Universiti Teknologi
Mara (UiTM) Cawangan Pulau Pinang for giving a chance to explore more on law involve
in construction industry which related with my course of study.

I am very grateful for the cooperation given by Jabatan Kerja Raya (JKR) in
helping me to find related document to be used in this report. Thank you to En. Jaafar,
assistant engineer in JKR for giving his guidance to me in finding important information to
be adopted in this written report.
 ABSTRACT

This report was prepared to complete the individual assignment of subject Law
for Construction (CEM583). The report contains infrastructure project detail and
background where it stated all the information about the project in chapter 1. In chapter 2,
9 basic elements in document contract related to the project were described clearly. All the
description of each item was based on the content of document contract which obtained
during my visit to Jabatan Kerja Raya (JKR) Sabak Bernam. Next, in chapter 3, it described
a court case that I chose which related with the project. The detail information about the
court case including judges, defendant, case fact and court involve were described in this
chapter. In chapter 4, it describes the potential of the court case to happen to the project
chose earlier. The discussion was referred to the 9 basics element in chapter 2. The propose
solution or remedies to prevent the case from happen again in the future was describe in
chapter 5. While, in chapter 6, it elaborates the conclusion for this report and chapter 7 were
the list of references and appendices that were used in this report.
1.0 PROJECT DESCRIPTION

1.1 Project Details

This project is one of the projects manage by Jabatan Kerja Raya (JKR)
Sabak Bernam. The assigned contractor carried out the required works as stated
in the contract document. The detail of the project was stated in the table below.

Project Name Pembaikan Bangunan dan Kemudahan Infrastruktur ‘Sewerage

Treatment Plant’ (STP) Serta Kemudahan Mekanikal dan
Elektrikal di Institut Perakaunan Negara (IPN), Sabak Bernam,
Selangor (Kesan Mendapan Tanah)
Location Institut Perakaunan Negara (IPN) Sabak Bernam
Project Type Sewerage Treatment Plant (STP) – infrastructure
Contract Type PWD(JKR) Contract
Contract No JKR/IP/CSFB/11/2019
Cost of Project RM 5,294,741.85
Duration 78 weeks
Date of November 4, 2019
Possession
Date of May 2, 2021
Completion

Table 1: Project Detail

1.2 Stakeholders
The project stakeholders were known as main person or company who
responsible in manage, construct and complete the project referring to the given
period. Usually consist of main contractor, consultant, quantity surveyor and
developer. All of the stakeholders were mention in the contract document with
sign of agreement. Table below shows the details of the stakeholders involve in
this project.
Client Institut Perakaunan Negara (IPN)
Consultant JKR Malaysia
JKR Sabak Bernam
Quantity surveyor Cawangan Senggara Fasiliti Bangunan, JKR Malaysia
Contractor A.Rahis Sdn Bhd

Table 1.1: Project Stackholders

Contractor A.Rahis Sdn Bhd

Grade G6 (Bumiputera)
Registration No 930274-X (SSM)
Registration No 0120120209-SL-139930 9 (CIDB)
Registration No 0120120209-SL-139930 (BPKU)
Validity period January 3, 2020

Table 1.2: Detail of Contractor

2.0 ELEMENT IN CONTRACT DOCUMENT

2.1 A clear or firm offer or proposal

An offer made by the offeror must be clear, precise and well defined to
ease the other party clearly understand the situation and work to be carried out.
In Section 2(a) of the Contract Act, 1950, define an offer as “when one person
signifies to another his willingness to do or abstain from doing anything with a
view to obtaining the assent of that other to the act or abstinence, he is said to
make a proposal”. In this project, Jabatan Kerja Raya (JKR) Malaysia has made
a tender document and published to the news and website to enable the eligible
contractor to take part into the project. Tender document consists of description
of the project and condition of contract. For this project, A. Rahis Sdn Bhd as
the contractor make an offer to JKR after read the proposal made by JKR and
list out the detail price and works for the project before JKR decide to choose
them to manage the project. According to the Section 4(1) Contracts Act 1950,
“offer must be communicated”. After JKR choose the respective contractor,
further discussion will be carried out to get the agreement from both party before
pass the project.

2.2 An acceptance of the offer/proposal

An acceptance must be communicated among the parties to make a valid
contract. According to section 2(b) when the person to whom the proposal is
made signifies his assent thereto, the proposal is said to be accepted. When JKR
agreed to accept A. Rahis Sdn Bhd as the contractor, they will discuss among
them to come out with the agreement. In Section 7(a), in order to convert a
proposal into a promise, the acceptance must be absolute and unqualified, where
absolute means without any doubt and unqualified means having the right
knowledge. An acceptance letter was produced to show the agreement between
parties to hand over the project and carry out the works.

2.3 Intention to create legal relations

Intention of create legal relation means both parties intend to enter a
legally binding contract or agreement. Both parties must ready to accept any
 legal sequences that may happen in the future. In document contract, it already
stated the condition that both parties must accept when unexpected event occur
in the future. In this project, A. Rahis Sdn Bhd has agreed to enter the legally
binding agreement to manage and complete the project as mention in the
document contract with JKR.

2.4 Consideration
In contract, consideration was known as a must-have element to produce legally
binding contract. Consideration does not have to be money but it can be
something valuable such as service. It usually comprised of the two parties
promising to do something that benefit each party involved in the contract.
Consideration also known as “bargained-for-detriment”. In other word both
parties entering the contract must exchange something valuable to each other.
In this contract document, government has agreed to accept A. Rahis Sdn Bhd
to complete the STP project with total cost of RM5,294,741.85. A. Rahis Sdn
Bhd has made a promise with government (JKR) to construct the STP in return
government will pay some money to the contractor.

2.5 Certainty
Certainty can be defining as free from any doubt. In contract document all
related information were listed to avoid any uncertainties. In the document of
contract, the government has written the important information such as
acceptance letter, contractor information, bill of quantity and scope of works.
That information will reduce the uncertainty of the slide presentation.

2.6 Capacity
In contract, capacity refer to the individual status to enter the contract or
otherwise voidable. According to the Family Reform Act 1969, a minor under
18 years old can enter into a contract law however, not all contract available for
individual under 18 years old. Minors can only enter legally binding contract
for education, medicine and basic necessities. When minor reach 18, all contract
becomes legally binding for both parties. In this document contract, all the
parties which is JKR and the contractor were suit and able to enter the legally
binding contract.
2.7 Consent
Consent was another important element in the contract. It was known as the
understanding of the parties with the proposed contract. The consent of an
agreement must be genuine and voluntary. If there are some mistakes, or if one
party attempts to deceive or pressure the other, consent will not be considered
genuine and voluntary. In this project, JKR as government has agreed to receive
and gave a tendered to the A. Rahis Sdn. Bhd while A. Rahis Sdn Bhd has
agreed with the contract document. This shows that both parties voluntary and
able to give their consent in completing and supervising the project.

2.8 Legality
Legality is known as a legal agreement and contract made between both parties.
It is important to ensure the contract was legal because if anything happen in
future, court will not enforce any illegal contract. Contract document that was
signed by all parties involve was one of the legal agreements. If anything,
happen in the future, the case can be brought to the court to get justification. For
this project, A. Rahis Sdn Bhd has enter a legal contract by signing the contract
document with JKR which consist of letter of acceptance, agreement, scope of
works and many more.

2.9 Possibility
Possibility known as the contract binding must be possible to complete because
a legal contract cannot be undertaken to perform an impossible act. Before a
project was announced, there were several steps to get the background of
project, design, remedial measure and cost of project before the contract was
open for tendering. This STP project was one of the infrastructure projects and
before they decided to construct, all related information will be available in the
document contract. A. Rahis Sdn Bhd has decided to construct the project and
already sign the required agreement.
3.0 RELATED COURT CASE

3.1 Detail of case

Type of Court High Court, Kota Kinabalu, Sabah
Judge Chew Soo Ho
Plaintiff Imej Warisan Sdn Bhd
Company No. T 173210-X
Defendant Weida Environmental Technology Sdn Bhd
Company No. 401849-D

3.2 Case Facts

On 17.06.2006, Weida Environmental Technology Sdn Bhd (plaintiff) has
awarded Imej Warisan Sdn Bhd (defendant) to “Design and Build Sewage
Treatment Plants”. The defendant was required to complete the project of 2
treatment plants namely 1100 PE (STP1) and 900 PE (STP2). During the
liability period sometimes in May 2009 after the contractor has completed the
construction, plaintiff discovered cracks on the wall of the 1100 PE STP and
further found that the STP 1100 PE tank had been tilting to a differential
settlement of at least 400mm.

Plaintiff stated that the defendant was responsible for the whole construction
process and claimed that the defendant refused to carry out rectification works
according to the recommended design plaintiff has to cover the rectification
works at total cost of RM 602,580.00, therefore they claim for the damages
arising. At the same time, defendant denied that they liable to rectify the STP
1100 and stated that they already constructed the STP according to the
instruction and design received from Consultant Engineer. A counterclaim for
the sum of RM122,550.32 being the sub-contract fees allegedly still due and
owing by the plaintiff to the defendant was claimed.
3.3 Sentence Imposed
The judge has proved that the plaintiff able to prove their claim and defendant
has failed to defend themselves form plaintiff claim. The judge allow the
plaintiff to claim and enter judgement in the sum of RM 602,580.00 with interest
at the rate of 5% per annum from the date of judgement to date of realization
and come to agreed costs of RM40,000.00. To be fair with defendant
counterclaim, the judge has agreed to allow the sum of RM92,290.32 which
includes the RM36,000.00 of retention sum.

3.4 Court Involve

This case involves in High Court Kota Kinabalu
Plaintiff
Advocates Marina Tiu
Solicitors Yap Chin & Tiu
Defendant
Advocates Ronny Chan
Solicitors Ronny Chan & Co

3.5 Reference of Case

1. The Khen On & Anor v. Yeoh & Wu Development Sdn Bhd & Ors [1196]
2 CLJ 1105, 1112 FC.
2. Section 74(1) of the Contract Act 1950 (Act 136) was applied to claim for
compensation for the loss or damage caused by the defendant.
3. Contract Act 1950, s. 74(1)
4. Evidence Act 1950, s. 114(g)
5. Sarkar on Evidence 15th Ed Vol 2 pg 1678
 4.0 DISCUSSION

Based on the previous court case, the defendant failed to follow the instruction from
the plaintiff and affect the plaintiff to lost some money in order to do the rectification
process. It was believed that the defendant which is contractor failed to carry out their
duty when giving the responsibility to carry out the project.

In this part, a thorough discussion on 9 basic elements will be discuss between the
previous court case (Construction of Two Sewerage Treatment Plant at Sekolah
Menengah Teknik Beaufort Dan 150 Unit Kuarters Institusi Pendidikan) with the
current selection project (Pembaikan Bangunan Dan Kemudahan Infrastruktur
‘Sewerage Treatment Plant’ (STP) Serta Kemudahan Mekanikal Dan Elektrikal di
Institut Perakaunan Negara (IPN) Sabak Bernam.

Basic element Court Case Contract Document

Construction of Two Sewerage Pembaikan Bangunan Dan
Treatment Plant at Sekolah Kemudahan Infrastruktur
Menengah Teknik Beaufort Dan ‘Sewerage Treatment Plant’ (STP)
150 Unit Kuarters Institusi Serta Kemudahan Mekanikal Dan
Pendidikan Elektrikal di Institut Perakaunan
Negara (IPN) Sabak Bernam
A clear or firm This project was awarded from This project was awarded by the
offer or Imej Warisan Sdn Bhd as the main government which is Jabatan Kerja
proposal contractor to the Weida Raya (JKR) to the A. Rahis Sdn
Environmental Technology Sdn Bhd who responsible to construct
Bhd as the subcontractor who and complete the project.
responsible for whole construction.
An acceptance On June 17, 2006 Imej Warisan On October 22, 2019, A. Rahis
of the Sdn Bhd had tendered for and Sdn Bhd has been selected to be
offer/proposal awarded Weida Environmental the main contractor of the project
Technology Sdn Bhd to fully by the JKR and they accept the
responsible for the project starting proposal.
 from design to the completion of
construction.
Intention to In this project, Imej Warisan as the In this project government which
create legal main contractor and Weida represent Jabatan Kerja Raya
relations Environmentl Technology Sdn Bhd (JKR) and A. Rahis Sdn Bhd agree
as the subcontractor agree to create to enter a legal binding contract.
legal binding agreement.
Consideration For this project, Weida For this project, A. Rahis Sdn Bhd
Environmental Technology Sdn has accept the offer from JKR to
Bhd accept the offer from Imej complete the project within 78
Warisan Sdn Bhd to fully weeks with the cost of project
responsible for the completion of RM5,294,741.85
project that was issued on
December 5, 2006. But on May
2009 when the Imej Warisan Sdn
Bhd discover crack on one of the
STP tank and further investigation
found that the STP was tilted,
Weida Environmental Technology
failed to carry out their duties to do
the maintenance and Imej Warisan
Sdn Bhd had to cover the loss to do
the rectification process.
Certainty In this court case, it stated that the In this on-going project, A. Rahis
Weida Environmental Technology Sdn Bhd had been choose to carry
Sdn Bhd failed to follow the out the project because they are
condition of the contract and make capable to complete the project.
Imej Warisan Sdn Bhd suffer a loss
to do the maintenance process.
Capacity In this project, Weida In this project, JKR has made a
Environmental Technology Sdn quotation and open the project for
Bhd fulfil the age requirement and the tender. Upon selection of the
free from mental illness, but they contractor, it was stated that A.
 failed to carry out maintenance Rahis Sdn Bhd fulfil the age
works when the Imej Warisan Sdn requirement and free from mental
Bhd had informed about the crack illness. Therefore, they have a
and tilt at one of the builds STP capacity to enter legally binding
tank. contract.
Consent At first, Imej Warisan Sdn Bhd and In this project, Letter of Agreement
Weida Environmental Technology shows that both parties involve
Sdn Bhd had consent on which were A. Rahis Sdn Bhd and
completion of the project, but when JKR shows their consent in the
the main contractor which is Imej binding contract
Warisan Sdn Bhd discovered the
crack at the tank, Weida
Environmental Technology Sdn
Bhd failed to carry out maintenance
works.
Legality For this project, both parties agree For this project, JKR must have
to signed the agreement. As the free consent and consideration with
agreement had been signed, the the contractor before the contract
contract become legal between Imej become legal. After A. Rahis Sdn
Warisan Sdn Bhd and Weida Bhd and JKR signed the contract,
Environmental Technology Sdn both parties already involve into
Bhd. Legal contract allow them to legal and valid contract. Anything
bring their problem into the court. happens in the future; they can
bring the issues to the court for
hearing and justification.
Possibility From the court case, Imej Warisan For this project, government which
Sdn Bhd had tendered and awarded was JKR has prepared a tender
Weida Environmental Technology document and open to any
Sdn Bhd to complete the project contractor to join the tender
because it was possible to carry out because JKR knows that the
the works to its completion. It project was possible to complete
become failed when the Weida its construction. When A. Rahis
Environmental Technology Sdn Sdn Bhd enter and award with the
 Bhd does not carry out their duties project, they also aware that they
to maintain and do the rectification were able to finish up the project
process. based on the required time and cost
of project.

Based on the 9 basic elements shows in the table above, it can be concluded that there
has a low possibility for the on-going project involved with the same case of court case.
This is because, JKR has validate that the contractor, A. Rahis Sdn Bhd was capable
and will complete the project within the range of time with the cost provided. Such case
can happen to the on-going project when lack of supervision from the JKR.
5.0 REMEDIES

1. Select the competent contractor to carry out the project.

Based on the court case mention before, it shows that the subcontractor which was
Weida Environmental Technology Sdn Bhd (defendant) failed to carry out their
responsibility to complete the project as stated in the contract. During the liability
period, when Imej Warisan Sdn Bhd (plaintiff) discovered the crack on one of the
STP tank namely STP 1100 and informed the defendant, further investigation
carried out that the STP tank tilted to a differential settlement about 400mm, the
defendant failed to carry out the rectification works and make the plaintiff suffer a
loss to cover the maintenance works at the total costs of RM602,580.00.

It is important to identify the competent contractor to carry out the project. The
contractor must fulfil the 9 elements in order to make the project to be successful
without hurting any parties. Section 74(1) of the Contract Act 1950 (Act 136) was
applied to claim for compensation for the loss or damage caused by the defendant.
The contractor must competent in serving good quality of works, able to complete
the works within time and have a full consent on their responsibility before the
project pass to the owner.

2. Provide better supervision on the project

This problem may occur due to lack of supervision from the main contractor, in this
court case it was referred to Imej Warisan Sdn Bhd. Even though the project was
completely pass to the subcontractor, Weida Environmental Technology Sdn Bhd,
the main contractor should supervise the process of the construction to avoid any
inconvenience things happen. The defendant claim that they already do the works
accordingly by referring to the drawing. Lack of supervision cannot ensure that the
works done by the defendant was carry out according to the plan or not and lead the
defendant also suffer the loss from the plaintiff claims

Good supervision is required to ensure the works done by any party followed the
standard given by the main contractor or owner of the project. Inadequate
supervision can leas to various failure such as collapse or serious cracking. In this
court case, the STP tank 1100 was first discovered the crack but then further
investigation carried out even worse things happen to the STP tank.
6.0 CONCLUSION

As the conclusion, document contract was important when involving with project as
this document content all agreement made by both parties and a legal binding contract
that can bring to the court for hearing if any things happen in the future. The contract
document also explained the works need to be done by the contractor to complete the
project within the range of time with the amount provided. Contract can be classified
into four types of court which were PAM contract, CIDB contract, IEM contract and
PWD (JKR) contract. In this report, I adopted PWD (JKR) contract that was obtained
during my visit to Jabatan Kerja Raya (JKR) Sabak Bernam.

I stated the court case that related to the on-going project with the description of the
court involve, the judge, plaintiff and defendant, case fact and the sentence imposed by
the judges. I also have done differentiate between both court case and selected project
on 9 basic elements that a contract must have to be successful project without hurting
any parties involved. I have stated the remedial action that should be taken in order to
avoid the same cases happen in the future.
7.0 REFERENCES

1. Law for Construction Lecture Notes

2. https://www.lawteacher.net/
3. Open Access Uitm- Court Case
4. Jabatan Kerja Raya-JKR Sabak Bernam
APPENDICES
[2013] 1 LNS 1419 Legal Network Series

MALAYSIA

IN THE HIGH COURT OF SABAH AND SARAWAK

AT KOTA KINABALU

[SUIT NO: KK-22-175-2011]

BETWEEN

IMEJ WARISAN SDN BHD … PLAINTIFF

(Company No. T 173210-X)

AND

WEIDA ENVIRONMENTAL TECHNOLOGY

SDN BHD … DEFENDANT
(Company No. 401849-D)

CONTRACT: Building contract - Sub-contract - Breach - Whether

defendant liable to pay plaintiff costs of the reconstruction of the
Sewerage Treatment Plant (STP) incurred by it - Architect issued
instruction to defendant to make good the tilting problem of the STP -
Plaintiff engaged other contractor to carry out the work upon
defendant’s failure to make good - Whether refusal to make good the
defects could be construed as a breach of contract - Whether plaintiff
could rely on s. 74(1) of the Contracts Act 1950 to claim compensation
for the loss or damage caused by defendant

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[2013] 1 LNS 1419 Legal Network Series

CONTRACT: Building contract - Sub-contract - Defects - Instruction

in writing from Architect requiring defendant to resolve the defect
problem with a permanent solution - Architect did not say in his letter
that instruction was issued pursuant to Clause 15.3 but rather Clause
2.1 - Whether disentitled plaintiff to claim - Whether instruction was
within the Defects Liability Period

EVIDENCE: Adverse inference - Failure to call witness - Even if the

Architect was not called as a witness by plaintiff, whether any adverse
inference or presumption against plaintiff should be drawn - Whether
s. 114(g) Evidence Act 1950 applicable for willful suppression of
material witness or evidence and not mere non-calling of a witness or
his evidence

[Plaintiff’s claim allowed and judgment entered for the Plaintiff for
RM602,580.00 with interest at 5% per annum from the date of
judgment to date of realization and agreed costs of RM40,000.00;
Counterclaim allowed for RM92,290.32 and this sum to be set off
from the judgment sum of RM602,580.00 with no orders as to costs.]

Case(s) referred to:

The Khem On & Anor v. Yeoh & Wu Development Sdn Bhd & Ors [1996]
2 CLJ 1105, 1112 FC

Legislation referred to:

Contracts Act 1950, s. 74(1)

Evidence Act 1950, s. 114(g)

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[2013] 1 LNS 1419 Legal Network Series

Other source(s) referred to:

Sarkar on Evidence 15 th Ed Vol 2 pg 1678

DECISION

Introduction

Plaintiff was the contractor for the project known as ‘Sekolah

Menengah Teknik Beaufort Dan 150 Unit Kuarters Institusi Pendidikan’ to be

constructed on land held under CL 175342462 at Beaufort (“the said

Project”), Sabah. On 17.6.2006 Defendant had tendered for and was

awarded by the Plaintiff the subcontract to “Design and Build Sewage

Treatment Plants” in the aforesaid project. Under this contract, the

Defendant had covenanted to a design and build concept to complete the 2

treatment plants namely 1100 PE (STP1) and 900 PE (STP2) sewerage

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[2013] 1 LNS 1419 Legal Network Series

treatment plants (“STP”). Instruction to commence work was issued by the

Plaintiff vide letter dated 5.12.2006.

Upon the alleged completion of the aforesaid 2 sewerage treatment

plants by the Defendant on 11.11.2008 and during the defects liability period

ie, sometime in May 2009, Plaintiff discovered cracks on the walls of the

1100 PE STP and it was further found that the STP 1100 PE tank had been

tilting to a differential settlement of at least 400mm. Plaintiff contended that

the Defendant is wholly responsible for the design, build, monitoring,

commissioning and completion of the 2 STP and is liable at Defendant’s own

costs to rectify and make good the 1100 PE STP and/or to reimburse the

Plaintiff’s costs of such rectification work. When the Defendant neglected,

failed or refused to carry out the rectification works according to the

recommendations and design of the Consultant Engineer for the main works,

Perunding Shakelmey dan Rakan-Rakan Sdn Bhd (the “PSRR”), Plaintiff

had caused to be carried out such rectification at the total costs of

RM602,580.00.

Plaintiff therefore claims for the sum of RM602,580.00 being damages

arising from the breach of the contract by the Defendant and costs, inter alia.

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[2013] 1 LNS 1419 Legal Network Series

Defendant denied that they are liable to rectify the defects of the 1100

STP and averred that they had constructed the STP according to the

instructions and design of the Consultant Engineer, the PSRR and that they

had duly performed the piling work using the Plaintiff’s piling rig to the

satisfaction of the Plaintiff. Defendant further pleaded that the Architect was

incompetent to issue the rectification orders for rectification works under the

terms of the contract. A counterclaim for the sum of RM122,550.32 being

the sub-contract fees allegedly still due and owing by the Plaintiff to the

Defendant was claimed.

The Issues

The agreed sole issue for determination by this Court is:

“Whether the Defendant is liable to pay the Plainti ff the sum of

RM602,580.00 being the costs of the reconstruction of the STP

(Sewerage Treatment Plant) incurred by the Plaintiff.”

Nevertheless, since Defendant has put up a counterclaim, it is

necessary to determine whether Defendant has proved the counterclaim.

Evaluation & Findings

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The agreed facts between the parties herein as shown in Bundle E

show that the fact that the status of the Plaintiff being the main contractor of

the said Project while the Defendant was engaged on 17.6.2006 by the

Plaintiff as sub-contractor for the design and build of the aforesaid 2 STP

namely the 1100 PE and the 900 PE for the Sekolah Menengah Teknik

Beaufort Sabah and the 150 units of Kuarters Insititusi Pendidikan and

instruction to commence work vide letter dated 5.7.2006 issued by the

Plaintiff to the Defendant as well as the work having been completed on

11.11.2008 are not in dispute. It is further agreed that the contract between

the Plaintiff and the Defendant was on a design and build concept meaning

that the Defendant was wholly responsible for the design, building,

monitoring, testing and commissioning, completion and maintenance of the

said 2 STP. Parties have also agreed that in May 2009, cracks were

discovered on the wall of STP 1100 PE and that it had tilted. There is also

no dispute that the Plaintiff had engaged Hygroclear Engineering Sdn Bhd

as sub-contractor to reconstruct the STP 1100 PE.

Substantially parties have agreed on the facts of this case that Plaintiff

and Defendant had entered into a sub-contract work to design and build the

2 STP upon which Defendant had completed the work but it was discovered

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that one of the 2 STP ie, the 1100 PE had cracks on its wall and it had

substantially tilted.

Evidence shows that sometime on 16.5.2009 and on 10.6.2009 the

Plaintiff had informed the Defendant of the cracks on the walls of STP 1100

PE and that the STP had tilted towards the sludge holding section with a

differential settlement of about 150 mm. Defendant was told to identify the

cause of the settlement and the tilting and to propose technical remedial

solutions.

On 12.6.2009 a levelling survey was carried out by the Plaintiff and it

was discovered that the tilting had escalated to about 400 mm. Plaintiff had

informed the Defendant to take immediate action to remedy the problem.

On 23.6.2009, the Consultant Engineer, PSRR vide a letter had

indicated that Defendant’s engineers should resolve the problem.

However, despite repeated requests, Defendant had failed or refused

to propose a technical solution although they had assured the Plaintiff at a

meeting held on 9.7.2009 that they would investigate the cause and submit

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a report with technical remedial solution by 15.7.2009. Defendant did

propose to detach the structure of the sludge drying bed from the sludge-

holding/setting tank but Plaintiff contended that the proposal was cosmetic

in nature which would not resolve the tilting problem of the STP. Plaintiff

alleged that the Defendant’s said proposal was to get through the defects

liability period without having to incur costs to rectify the tilting of the sludge-

holding/setting tank.

On 16.11.2009, Plaintiff had informed the Defendant vide letters that

the Plaintiff would appoint a 3rd party contractor to carry out the rectification

work according to the Consultant Engineer’s, PSRR’s recommendation.

In February 2010 and May 2010, Plaintiff had instructed Messrs

Mojigoh, a licensed surveyor to carry out a levelling survey on the 1100 PE

STP and it was found that the tilting had continued. According to Ms. Nelly

Majain who is a licensed civil engineer (PW2), the detachment of the sludge

drying bed from the sludge holding/setting tank was not a permanent solution

to the tilting problem unless there was no tilting but from the survey report in

February and May 2010, it showed that the settlement had increased

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tremendously up to 700 mm. Thus, the permanent solution, she opined, was

to reconstruct the STP.

On 7.7.2010, the project architect then issued a letter to the Defendant

informing the latter that the said STP 1100 continued to tilt and the technical

proposal was no longer suitable wherein the Defendant was instructed to

carry out rectification works acceptable by PSRR and the Plaintiff; Defendant

was also instructed to contact PSRR for their recommendation or to appoint

their own licensed civil and structural engineer for a permanent solution to

the problem. It appears that the Defendant did not respond to the architect’s

direction nor take any action to rectify the defects. This led the Plaintiff to

appoint Hydroclear Engineering Sdn Bhd to carry out the work at the costs

of RM602,580.00. In denying Plaintiff’s claim, on the facts, Defendant

pleaded that they are not liable to the Plaintiff’s claim contending that

Plaintiff’s claim is based on its pleaded case vide paragraphs 4 (c) and 4 (d)

in the Statement Of Claim which provide:

“4(c). T h e Defendant shall make good any defects,

shrinkages or other faults which appears within the

Defects Liability Period, being 24 months from the

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date of issuance of the Certificate of Practical

Completion; and

4(d) The Defendant will forthwith comply with all

instructions issued by the Architect or the Defendant,

failing which the Plaintiff shall be entitled to employ

and pay other persons to execute any work which may

be necessary to give effect to the instructions.”

which bear reference to Clause 15.0 of the contract between Plaintiff and

Defendant which fundamentally enlisted, inter alia, that it is the opinion of the

Architect as to the practical completion of the works for which the Architect

shall forthwith issue a Certificate of Practical Completion, that the Architect

shall specify within the Defects Liability Period a schedule of defects and

delivered to the Defendant not later than 14 days after the expiration of the

Defects Liability Period and the Defendant shall make good such defects,

shrinkages and other faults therein specified in the Architect’s schedule, that

the Architect may issue instructions requiring any defects etc. which appear

within the Defects Liability Period to be made good and if the defects etc.

had been made good, the Architect shall so issue a certificate of making

good defects and completion of making good defects shall be deemed to

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have taken place on the day named in the certificate. Defendant contended

that since the Architect was not called to testify, it must be presumed that the

Defendant had performed and completed all the necessary works specified.

Since the Architect did not testify, Defendant contended that the Plaintiff had

failed to prove requirement under Clause 15.3 of the contract which relates

to para 4 (c) of the Statement Of Claim that the Architect must “whenever he

considers it necessary issue instructions requiring any defects, shrinkage or

other faults which appear within the Defects Liability Period and which are

due to materials or workmanship not in accordance with this Contract to be

made good.”

On this point, Plaintiff submitted that the Defendant had failed to plead

in their Defence that the Plaintiff is not entitled to the claim because there

was no instruction from the Architect to carry out rectification works under

Clause 15.3 of the said contract nor that the rectification work was done by

reconstruction of the 1100 STP. What had been pleaded by the Defence is

that the Architect was and is at all material times incompetent to issue

rectification orders for rectification works. (Para. 19 of Statement of

Defence).

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From the facts, there is apparently no dispute that the said Architect

had issued instructions vide his letter dated 7.7.2010 to the Defendant

specifying that the severity of the tilting has rendered the earlier proposal by

Messrs. Perunding dan Rakan-Rakan Sdn Bhd no longer suitable and that

Defendant was to carry out rectification work in a manner acceptable to

PSRR and Plaintiff. Defendant had also failed to heed the Architect’s

instructions to contact PSRR for their recommendations or to engage

independent engineers to propose a permanent technical solution. With the

contemporaneous documents before the Court, I find that the Architect had

in fact issued instructions to the Defendant to make good the defects of tilting

of the 1100 STP which is the rectification work by either proposing a

permanent solution through independent engineers or in a manner

acceptable to the Consultant Engineer/PSRR or the Plaintiff. However,

Defendant had not done so. When the defect in the instant case is known to

the Defendant during the Defects Liability Period and with the instruction in

writing from the Architect requiring the Defendant to resolve the said defect

problem with a permanent solution, I find that the Architect had duly

conformed with Clause 15.3 of the contract when he had issued the said

instructions. I do not agree with the contention put forward by the Defendant

that the mere fact that the Architect did not say in his letter of instruction

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dated 7.7.2010 (pp. 278-281) that the instruction was issued pursuant to

Clause 15.3 but Clause 2.1 would disentitle the Plaintiff to claim for reasons

that the effect is the same and that when this instruction was issued, it was

within the Defects Liability Period. Thus, even if the Architect was not called

as a witness by the Plaintiff, I find no valid reason to draw any adverse

inference or presumption against the Plaintiff bearing in mind that the

provision of section 114(g) Evidence Act 1950 is applicable for willful

suppression of material witness or evidence but not merely because of non-

calling of a witness or his evidence; see Sarkar on Evidence 15th Ed. Vol. 2

pg. 1678.

Defendant had further contended that Clause 15.3 and Clause 2.1 and

2.2 of the contract between the parties do not provide that the Plaintiff could

employ and pay other persons to execute any work which may be necessary

to give effect to the instructions of the Architect. Plaintiff submitted that

irrespective whether the Architect had given instructions to rectify the defects

or otherwise, the Plaintiff should not be deprived of its right to claim for

breach of contract under common law citing Teh Khem On & Anor v. Yeoh

& Wu Development Sdn Bhd & Ors. [1996] 2 CLJ 1105, 1112 F.C., inter alia.

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In Teh Khew On & Anor (supra), His Lordship Peh Swee Chin FCJ said @

p. 1112:

“I share the view espoused by Lord Denning in Hancock

& Ors. v. BW Brazier Ltd. [1966] 2 ALL ER 901; [1966] 1 WLR

1317, to the effect that such clause similar to cl. 23 in our instant

appeal about making good structural defects discovered within

six months, would not take away the right to sue in respect of

such defects which were not discoverable within such six

months, the provision of an express remedy of making good the

same defects will not ipso facto take away the rights of any

purchaser which normally follow at common law in the case of

a breach of contract. It is pertinent to mention that our cl. 23

provides for 12 months instead of six months. The same

principles would apply.

Thus, the said line of defence also fails’,

Plaintiff had indeed pleaded in the Statement Of Claim vide para 4(d)

that ‘the Defendant will forthwith comply with all instructions issued by the

Architect to the Defendant, failing which the Plaintiff shall be entitled to

employ and pay other persons to execute any work which may be necessary

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to give effect to the instructions.” It is a fact that the Architect had issued

instruction to Defendant to make good permanently the tilting problem of the

STP and when the Defendant had failed or neglected to do so, Plaintiff could

rely on common law principles to engage other contractor to carry out the

work that was not properly performed for reason that the failure to comply

with the terms and conditions of the contract by failure or refusal to make

good the defects in the performance of the contract which is fundamental

can be construed as a breach of the contract. Plaintiff could also rely on

section 74(1) of the Contracts Act 1950 (Act 136) to claim for compensation

for the loss or damage caused by the Defendant, which naturally arose in

the usual course of things from the breach the parties knew when they made

the contract to be likely to result from the breach of it. Since the Plaintiff had

so pleaded that they shall be entitled to employ and pay other person to

execute any work and pay for it to give effect to the Architect’s instructions

to make good the defects, I find that this arises as a consequence of the

breach by the Defendant in not complying with the covenant in the contract

which justified the Plaintiff’s claim. I do not find the Defendant’s contention

tenable that the Plaintiff’s claim must only be confined to a particular clause

of the contract. A breach of a fundamental term of the contract will

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attract compensation for the loss or damage arising out of the breach. I find

Plaintiff’s claim is within the law.

On the Defendant’s defence that they are not liable because they had

constructed the STP according to the instructions of PSRR and the Plaintiff’s

consultant who gave instructions to use the Plaintiff’s piling rig and the

Plaintiff was to make available 150 mm diameter piles for the purpose of

carrying out and the Defendant did carry out the re-pile to the satisfaction of

the Plaintiff’s consultant and that the tilting could be due to the change in

design and specification, inter alia, I find that there is no clear evidence from

the defence to rebut the allegation of defects in the tilting. Defence had not

come up with any technical report on the tilting to draw a conclusion that it

was due to the Plaintiff’s piles or the change in design and specification that

caused the said tilting. It must be borne in mind that Defendant is the

contracting party to this design and build contract. They must be conversant

and must be satisfied with all technical nature of the work to be carried out

as well as to complete the construction without defects of a substantial

nature. Even if the pile was to be made available by the Plaintiff, the

Defendant still held the responsibility and obligation to ensure that it was the

correct and proper one to be used and could not follow blindly if it was

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inappropriate or unsuitable especially so when they are obligated under the

contract to design and build and must therefore perform in conformity with

their expertise. It will be unacceptable to shift the blame to others when they

had not shown that they had satisfied their fundamental obligation to build in

the manner that the STP is well structured and safe. I do not find this line of

defence to be meritorious and sustainable.

For the foregoing reasons, I hold that the Plaintiff has proved its claim

on a balance of probability and that the Defence has failed to rebut the

Plaintiff’s claim on a balance of probability. I therefore allow the Plaintiff’s

claim and enter judgment for the Plaintiff in the sum of RM602,580.00 with

interest at the rate of 5% per annum from the date of judgment to date of

realization and agreed costs of RM40,000.00.

In respect of the defence’s counterclaim, I allowed it in the sum of

RM92,290.32 as shown in the Balance of the Account as per the Plaintiff’s

ledger as at 31.3.2009 (Bundle B pg. 308) which included the RM36,000.00

of retention sum being the sum that the Plaintiff had not disputed to be still

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due to the Defendant and I order that this sum shall be set off from the
judgment sum of RM602,580.00 with no orders as to costs.

Dated: 20 DECEMBER 2013

(CHEW SOO HO)

Judge, High Court
Kota Kinabalu, Sabah

Counsel:

For the plaintiff - Marina Tiu; M/s Yap Chin & Tiu
Advocates and Solicitors
KOTA KINABALU

For the defendant - Ronny Cham; M/s Ronny Cham & Co

Advocates and Solicitors
KOTA KINABALU

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