Variations

1.0 Introduction In Malaysia, there are two standard form of contract form generally being used in construction contract that is Agreement and Conditions Of PAM Contract 2006 ( ith !uantities" and #he Public of Contract #o .e /sed or$ %e&artment (P' '%'" (orm 20)A (*e+' 200," -tandard (orm here .ills Of !uantities (orm Of Part Of #he Contract' #he sco&e for

the term 01ariation2 in Malaysian Agreement and Conditions of PAM Contract 2006 ( ith !uantities" in Clause 33'0 is due to any discre&ancies or di+ergences disco+ered between any two or more of the Contract %ocument or Contract .ills, the alteration or modification of the design, 4uality or 4uantity of the substitution of the or$s which inclusi+e of any addition, omission or any or$s' It is also includes the usage of the e5&enditure for Prime Cost -ums

and Pro+isional -ums, sanction in writing of any +ariations made by the Contractor otherwise than the Architect, and the o&ening u& for ins&ection of any co+ered u& wor$ to carry out testing on the materials or goods which has been used for the wor$s and ensure all co+ered u& wor$s using materials or goods which in accordance with the Contract' 1ariations also clarified as an ad6ustment or amendment of the Contract %rawings of the -&ecifications necessitated by the com&liance to the statutory obligation, and the remo+al of materials and goods from the site which not com&lied with the Contract' Clause 27'0 in the P' '%' (orm 20)A (*e+' 200," -tandard (orm of Contract to .e /sed here .ills of !uantities (orm of Part of the Contract clarify 1ariations as an ad6ustment or amendment in the Contract %ocument which re4uires the alteration or modification of the design, 4uality or 4uantity of the or$s inclusi+e of any addition, omission or any substitution or$s, of any wor$s, the modification of standard for the materials or goods to be use for the and any remo+al of materials or goods from the site which not com&lied with the contract' In addition, 1ariations may arise due to an error in the Contract .ills or Contract %ocument and changes to be made on the original wor$ as &er re4uested by the 8m&loyer or Client' Any 1ariations made under the Clause 33'0 in PAM Contract 2006 and Clause 27'0 in P' '%' (orm 20)A (*e+' 200," ordered by the Architect would not im&erfect the original meaning of the

Contract whereby all +ariations ordered by the Architect must be conform by the Contractor immediately while the !uantity -ur+eyor without delay &roceed with the measurement and inclusi+e in the monthly &rogress &ayment once the wor$s has been com&leted' Any addition or omission of +ariations wor$s will be included in the final contract sum' 9ot all +ariation wor$s can be e5ecuted by the main contractor due to the +ariations is re4uiring the nominated sub: contractor to carry out the +ariation wor$s under the Prime Cost -ums' 1ariation sometimes arises due to error made by the Consultant, e'g' the !uantity -ur+eyor during the &re&aration of tender document, the descri&tion in the bills of 4uantities is not tally with the contract s&ecifications e'g' in ;<* -tandard -&ecification for .uilding (-ection I" saying that element under >ot *olled -tructural -teel or$s? or$s 200=

@All hot rolled structural steelwor$ design, materials and wor$manshi& shall com&ly with the ;<* -tandard -&ecification for -tructural -teelwor$ 9o' 20600:003A:AA and shall be in Accordance with the latest +ersion of .- =A=0' /nless otherwise a&&ro+ed by the -'O, all structural steel com&onents shall conform to the standard as shown in #able A' #he Contractor may with the a&&ro+al of the -'O &ro&ose other e4ui+alent structural steel com&onents at no e5tra cost' #he Contractor shall submit with his &ro&osal his design Calculations, s$etches, detailing and -&ecifications which shall be certified by a Professional 8ngineer' In addition, the Contractor shall submit documents and details as listed in Clause2') #he following is sam&le of error done by the !uantity -ur+eyor during &re&aration of bills of 4uantities which enable +ariation wor$sB @Supply and install approved proprietary prefabricated roof trusses in light weight steel including all necessary battens and material fabrication and fixing in position.to the manufacturers specification;

hile in the contract s&ecification saying thatB @Supply and install approved proprietary prefabricated roof trusses in light weight steel

including all necessary battens and material fabrication and fixing in position.to the approval of Superintending Officer (S.O.) and shall be installed in accordance with the manufacturers specification and recommendation

1ariation wor$s also ha+e an effect on the total additional wor$ (if it is an e5tra wor$", the com&letion &eriod due to e5tended com&letion time, re4uiring in addition usage of money, the ad6ustment on the contract amount , and the loss of &roducti+ity and additional wor$ing hours for the &ro6ect consultants'

HIGH COURT OF MALAYA Teknik Ceka !dn "#d ! vs ! Vi$$a Gentin% &e'e$o ment !dn "#d Coram A"&UL MALI( I!HA( ) )ud%ment A.du$ Ma$ik $s#ak ) 3' #his was an a&&lication by the &laintiff by way of a summons:in:chambers as *+ )U,- *000

seen in 8ncl =2 for an order that the defendant, its agents and its ser+ants de&osit the sum of *M3,,06,003'=0 being the first moiety of the retention sum into a se&arate ban$ account until the conclusion of this trial and action' In su&&ort of the a&&lication, the &laintiff affirmed two affida+its through *ahiman .ustaman as seen in 8ncl =3 which was affirmed on %ecember 27, 3AAA and as seen in 8ncl 60 that was affirmed on A&ril ,, 3AAA' #he defendant res&onded and filed two affida+its by way of a re&ly through M Angeline *a6B one affirmed on March 2,, 2000 as seen in 8ncl 62 and the other affirmed on A&ril 23, 2000 as seen in 8ncl 63' In short, the defendant contested 8ncl =2' 2' #he &laintiffs a&&lication in 8ncl =2 was more in the nature of an interim

&reser+ation of &ro&erty as en+isaged in Order 2A r 2(3" of the *ules of the >igh Court 3AC0 (D*>CD" which states as followsB On the a&&lication of any &arty to a cause or matter the Court may ma$e an order for the detention, custody or &reser+ation of any &ro&erty which is the sub6ect:matter of the cause or matter, or as to which any 4uestion may arise therein, or for the ins&ection of any such &ro&erty in the &ossession of a &arty to the cause or matter' )' .asically, the attracti+e feature of this rule is to &ro+ide for the &reser+ation of &ro&erty (C#a $in ' "arnett (3A32"2C #E* 2=6? ,ic#o$as ' Gan Rea$t/ !dn "#d F3A,0G 2 ME; CA? and Tan La/ !oon ' (am Ma# T#eatre !dn "#d F3AA2G 3 AM* ) 0" and the &ower of the court to act under this rule comes from its inherent 6urisdiction

with the ultimate moti+e of ad+ancing and &romoting a fair trial ( !'!, 0 ' O11icia$ !o$icitor F3A,0G ) All 8* 30,"' 8ither the &laintiff or the defendant is entitled to see$ the assistance of this rule' If the sum of money is identifiable, then the &rocess of &reser+ation under this rule may be resorted to' Indeed this rule may be in+o$ed to &reser+e an identifiable sum of money that arises from any criminal acti+ity (0est Mercia Consta.u$ar/ ' 0a%ener F3AC3G ) All 8* ),C and C#ie1 Consta.$e o1 (ent ' V F3AC2G 2 All 8* )6"' -o long as the money can be &reser+ed, this rule may be +igorously resorted to (2o$ini ' Gra/ F3C,AG 32 Ch% 7)C"'

FACT! OF TH- CA!-

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.y a contract dated A&ril 32, 3AA7, the defendant a&&ointed the &laintiff as the

main contractor in res&ect of the construction of the defendantHs resort a&artment on Eot P# 33)C6, >-(%" 30=6) Ienting >ighlands, Pahang %arul Ma$mur com&rising of 6CC units inclusi+e of two le+els of commercial &odiums, three le+els of car &ar$s and other e5ternal wor$s (hereinafter referred to as Dthe said wor$sD"' #he defendant a&&ointed Messrs Iera$ *e$a A$ite$ -dn as the architect for the said wor$s' #he salient features of the contract may com&endiously be stated in these wordsB a' the architect would issue monthly certificates of &ayments stating the

amount due to the &laintiff from the defendant and the &laintiff would be entitled to the &ayment stated therein within twenty one (23" days from the date wherein the res&ecti+e certificates were &resented to the defendant? b' the amount stated as due under the monthly certificates of &ayments would

be the +alue of the wor$ done and ,=J of the materials and goods deli+ered by the &laintiff less =J thereof which may be retained by the defendant as the retention fund? c' /&on &ractical com&letion of the said wor$s, the architect would issue a

certificate of &ractical com&letion together with a certificate for the release of one moiety of the retention fund and the &laintiff would then be entitled to the

&ayment of the moiety within 23 days from the &reser+ation of the certificate of &ractical com&letion to the defendant' =' It seemed that the &laintiff, in accordance with the terms of the contract, had

com&leted the said wor$s' It was a+erred that in the course of the said wor$s, the defendant had retained the sum of *M),732,00) as the retention fund' In due course, the architect had, on the following dates, issued &ayment certificates certifying that the following sums were &ayable to the &laintiff by the defendantB Certificate Dates Numbers 3C 0A'02'A= 3A 20 23 )0'0)'A= 2C'07'A= 03'06'A= Sums payable *M2,=6C,C00'00 *M3,767,000'00 *M3,0=2,,00'00

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*M3,666,600'00 *M6,,=2,300'00 Indeed the architect was em&owered to certify that the said wor$s ha+e been E* 6), at 67? H0 ,e'i$$ 4!un.$est5 Ltd '

&ractically or substantially com&leted (0estminster Cit/ Counci$ ' ) )ar'is 3 !ons Ltd F3A,0G 3 AII 8* A7) at A7A? F3A,0G 3 0i$$iam 2ress 3 !on Ltd (3AC3" 20 .E* ,C at C, and these cases should be com&ared with that of 2 3 M (a/e Ltd ' Hosier 3 &ickinson Ltd F3A,2G 3 All 8* 323? F3A,2G 3 E* 376"' 9ow, these &ayment certificates numbering 3C, 3A, 20 and 23 were &resented by the &laintiff to the defendant and accordingly the sums stated therein became due and owing' It was a+erred that the defendant had &aid the &laintiff the sum of *M2,=00,000 under&ayment certificate number 3C but the defendant was obstinate and failed and K or refused to ma$e &ayment of any other sums s&ecified in &ayment certificate numbers 3C, 3A, 20 and 23 thereof' #hat being the case, the sum of *M7,2=2,300 remained due and owing under &ayment certificate numbers 3C to 23' ,' On May =, 3AA=, the architect issued the certificate of &ractical com&letion and

the &laintiff &resented that certificate to the defendant on or about the same day' In the &remises, it was said that one moiety of the retention sum e4ui+alent to *M3,,06,003'=0 became due and &ayable by the defendant'

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/nfortunately, the defendant refused to &ay the sum of *M3,,06,003'=0 : which

sum was due and &ayable under the certificate of &ractical com&letion' (or these reasons, the &laintiff claimed as &er the statement of claim in 8ncl 3 against the defendant the followingB a' the sum of *M7,2=2,300 which was due and owing under &ayment

certificate numbers 3C to 23? b' the sum of *M3,,06,003'=0 which was due and owing under the

certificate of &ractical com&letion? c' interest on the abo+e sums at the rate of CJ &er annum calculated from

such date as the court deems fit? d' e' A' costs? and such further or other relief as the court thin$s fit'

It is now clear as crystal that the &laintiffs a&&lication in 8ncl =2 was orchestrated

to ensure that the sum of *M3,,06,003'=0 was secured in the e+ent the &laintiff was successful at the trial &ro&er' 30' #he defence and the counterclaim of the defendant raised interesting issues' It was

said that the contract between the &arties followed closely the standard PAM conditions of contract (hereinafter referred to as the DPAM contractD" and the defendant em&hasised that under clause )0(C" of the PAM contract, the interim certificate of &ayment and the certificate of &ractical com&letion shall not by themsel+es be conclusi+e e+idence that any wor$s, materials or goods to which it relates were in accordance with the contract s&ecifications' #he defendant also em&hasised that all wor$manshi&s, materials and com&onents throughout the said wor$s shall com&ly with the Malaysian standards and K or Codes of Practice or as the case may be, the .ritish standards and K or Codes of Practice or other standards or codes as are sti&ulated in the s&ecifications' It was the defendantHs stand that the &laintiff did not com&lete the said wor$s in accordance with the contract' 33' /nder the PAM contract, it was the duty of the &laintiff to carry out and com&lete

the said wor$s (23M (a/e ' Hosier 3 &ickinson Ltd (supra"? and Co.ert Ltd ' H (umar (3AA2" =A .E* CA"' #he cases of 0i$$iams ' Fit6maurice (3C=C" ) >L9 C77

and !#ar s ' !an 2au$o R$/ Co (3C,)" E* C Ch A&& =A, would im&ose an obligation on the &art of the &laintiff to do e+erything which was necessary to be done in order to com&lete the said wor$s' It was said that the &laintiff had failed to com&ly with the s&ecifications and had &roduced defecti+e wor$s' It seemed that the architect in issuing the certificates had failed to ta$e into account the &oor 4uality of the &laintiffs wor$manshi& es&ecially the defecti+e wor$s' It was said that the architect issued the interim certificates on the understanding that the &laintiff would subse4uently rectify the defecti+e wor$s' On this &remise, the defendant dis&uted the correctness of the certificates' 32' 8+en though the defendant admitted &aying the &laintiff the sum of *M2,=00,000,

yet the defendant challenged the interim certificate number 23 by stating that the architect had failed to ta$e into account the +arious omissions to the +ariation orders' Eater, on or about -e&tember 2C, 3AA=, the architect issued interim certificate 9o 22 wherein he authorised the deduction of *M3,)30,000 for substantial ma6or defecti+e wor$s, outstanding wor$s and wor$s that were not done in accordance with s&ecifications' #he defendant em&hasised that due consideration and effect must be gi+en to interim certificate number 22 and when so ta$en, it was said that the defendant was entitled to set:off the authorised deduction against the &laintiffs claim' 3)' #he defendant contended that the certificate of &ractical com&letion was null and

+oid, and of no effect' It was also contended that the certificate of &ractical com&letion did not bind the defendant in that it was in+alid and ought to be disregarded becauseB i' ii' iii' it was not issued inde&endently? it was issued with the collusion of the &laintiff? it failed to ta$e into account matters which should ha+e been considered, li$e for instanceB a' that the &laintiff had not com&leted nor handed o+er a substantial

&ortion of the wor$s? b' that there was failure on the &art of the &laintiff in not com&leting

the mechanical and electrical wor$s within the meaning of the contract? it was said that under the contract, com&letion shall be deemed to include

testing and commissioning of all &lants, e4ui&ment controls and distribution networ$s? c' that the &laintiff failed to hand o+er the two le+els of commercial

&odiums to the defendant' 2 It was for these +aried reasons that the defendant said that it was not obliged to release

the first moiety of the retention sum of *M3,,06,003'=0 to the &laintiff' ) In regard to the set:off, the defendant a+erred that +arious items of losses and damages

should be subtracted and these items were said to incor&orate the following featuresB (a" estimated cost of rectification (b" li4uidated and ascertained damages (c" wor$s that were su&&osed to be carried out by the &laintiff but instead it was com&leted and done by the defendant *M 3,37A,=3A'A= (d" &urchasersH claims for late deli+ery *M =,03),,A,'07 (e" due to the &laintiffs delay, together with the use of sub:standard materials and the subse4uent change in mar$et conditions, the sales of the defendantHs condominiums in Phase 2 has been ad+ersely affected and conse4uently the defendant has suffered tremendous loss of &rofits for Phase 2 and it could not be 4uantified (f" +ariation orders that were o+ercharged *M 3,,00,000'00 (g" materials incor&orated into wor$s *M =0C,A00'00 #he defendant also alleged by way of an alternati+e that the &laintiff &rocured the !uantum listed not *M 2,=00,000'00 *M 7,A2=,000'00

contract illegally or by way of a fraud' #he &articulars of fraud were itemised and set out in this fashionB i' the &laintiff had &aid the defendantHs general manager by the name of Eer oon >in secret bribes to

Cheng <oy and the site manager by the name of Chen

the tune of *M==0,000 in order to &rocure the contract' #his sum was &aid through a &erson by the name of Eim >wa <eng who ha&&ens to be the brother: in:law of Eer Cheng <oy and, at the material time, was said to be a student'

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the &laintiff had by way of a letter dated A&ril 27, 3AA) allegedly

a&&ointed Eim >wa <eng Consultant for a fee of *M==0,000 in order to Dobtain tender document, assistance in &ricing, negotiating and finalising of tenderD and at the same time to D&ro+ide administrati+e ser+ices following award of contract'D It was, howe+er, a term of the said letter that Eim >wa <eng Consultant would not be &aid its remuneration in the e+ent the &laintiff was not successful in its tender e5ercise' iii' by a letter dated May 27, 3AA), the &laintiffs sub:contractor by the name of 9atamas -dn .hd allegedly a&&ointed Eim >wa <eng Consultant for a fee of *M300,000 in accordance with the terms of the &laintiffs letter dated A&ril 27, 3AA)' i+' ironically, Eim >wa <eng, who was &ur&ortedly said to be the &ro6ect

consultant of the &laintiff and who was &aid a substantial amount of money was not and had ne+er been mentioned in any corres&ondence nor attended any meeting whatsoe+er' = It was further a+erred that both Eer Cheng <oy and Chen oon >in ac4uiesced in a

number of things' #hey did not ob6ect to the false claims for the said wor$s that were not com&leted, neither did they ob6ect to the substitution of materials and e4ui&ments which were of lower 4uality or +alue to that s&ecified nor did they ob6ect to the serious defects in the &laintiff s wor$s' #hey too did not bring to the attention of the architect, the serious defects in the &laintiffs wor$s' 6 -o the stand of the defendant was 4uite sim&le' .y bribing Eer Cheng <oy and Chen oon >in, the &laintiff was able to conceal deficiencies in the said wor$s because both these two &ersonalities con+eniently and &ur&osely failed to inform the architect of the e5istence of those inherent deficiencies' (or these reasons, the defendant a+erred that the contract was +oid and unenforceable and so it was submitted that the &laintiff was disabled from enforcing the certificates that were issued thereto' #hat being the case, the defendant held onto the notion that damages for fraud was due to them and the &articulars of fraud were listed asB i' ii' additional contract sum &aid as a result of fraud? cost of re&airing and re&lacing concealed defects and omissions? and

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iii' ,

+ariations that were fraudulently made'

In so far as the counterclaim was concerned, the defendant sought forB a' b' c' d' damages? interest? costs? and further and other relief'

All the affida+its in relation to 8ncl =2 carried the same facts as found in the &leadings

and there was thus no necessity for me to re&eat them here' -uffice for me to say that arguments were can+assed along the facts as seen in the affida+its and the &leadings thereto'

TH- FIR!T MOI-TY A,& TH- R-L-VA,T I!!U-! TH-R-TO

In so far as 8ncl =2 was concerned, the &laintiff was only concerned with the first moiety'

Clause A'03 of the PAM contract reads as followsB #he *etention -um shall be at =J throughout the Contractual &eriod' /&on the issue of certificate of Practical com&letion, 2'=J shall be released and whereas the remaining sum shall only be released at the end of the %efects 7 Eiability Period' and using this as a le+erage the &laintiff submitted through Mr' *an6an Chandran and Mr'

%hanara6 -i+asam&u that although the certificate of &ractical com&letion was issued on May =, 3AA= yet, to date, the defendant had not released the first moiety notwithstanding the direction by the architect' #he &laintiff was 4uite fran$ and in 8ncl =3 of &aragra&h 3) thereto, the &laintiff a+erred through *ahiman bin .ustaman that the second moiety was claimed in another court vide Ci+il -uit -6:22:,06:3AAA' -o, the &laintiffs interest in 8ncl =2 was mainly confined to the first moiety' 9ow, the certificate of &ractical com&letion that was issued on May =, 3AA= was e5hibited and mar$ed as 85h DID of 8ncl =3 and it carried the architectHs certification to the following effectB I K e declare that one moiety of the retention moneys deducted under

&re+ious certificates in res&ect of the said wor$s or sections thereof is to be released'

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#he architectHs role as an inde&endent &rofessional middleman can ne+er be doubted' In

2em.enaan Leo7 Tuck C#ui 3 !ons !dn "#d ' &r Lee$a8s Medica$ Centre !dn "#d F3AA=G 2 AM* 32CA -C, 8dgar ;ose&h ;r (C; writing for the (ederal Court a&tly remar$ed at & 3)0= of the re&ort thatB Cast in his role of a &rofessional middleman, the architect should, prima facie, be in an ideal &osition to ensure that both em&loyer and contractor &unctually carry out their res&ecti+e obligations under the contract' #his is not to say that if the em&loyer is dissatisfied with the &erformance of his architect, he is without remedy' In such a situation, the em&loyer may terminate the ser+ices of his architect and a&&oint a substitute architect or e+en sue his old architect' (-ee !utc$i11e ' T#ackra# F3A,7GAC ,2,, F3A,7G 6 3 AII 8* C=A? F3A,7G 2 E* 2A="' .ut unfortunately, the architect in the &resent case was in the dar$ in regard to the oon >in were said to

deficiencies in the said wor$s because both Eer Cheng <oy and Chen

ha+e been bribed by the &laintiff' Indeed if that was so, and here I cannot come to any definite conclusion until after the trial of the action, then the sting of the architectHs certificate of &ractical com&letion was at its lowest ebb' #he &laintiff sought to rationalise the a&&lication in 8ncl =2 and ad+anced three interesting reasonsB i' to &urely &reser+e the status "uo of the case until the dis&osal of the

substanti+e action and the final conclusion of the trial &ro&er? ii' the &rofound fear of the &laintiff that the defendant may not ha+e the

necessary funds at a future date and may not be able to com&ly with any order of this court &articularly in regard to the return of the first moiety, and it was to o+ercome this fear that the &laintiff had a&&lied for the first moiety to be de&osited in a se&arate ban$ account' iii' it was said that the defendant held the first moiety as a fiduciary trustee for the benefit of the &laintiff and that being the case it was only right, so the submission went, that the first moiety should be de&osited into a se&arate ban$ account to enable it to earn interest' C #he &laintiff was e+en magnanimous and was &re&ared to suggest two attracti+e o&tionsB

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a'

that the first moiety be &laced in a fi5ed de&osit account in the 6oint name

of both the &laintiff and the defendant solicitorsH firms? or b' trial' , Clause )0(7" of the PAM contract states that (the rele+ant &ortions only"B (7" #he amounts retained by +irtue of sub:clause ()" of this Condition shall be sub6ect to the following rulesB (a) #he 8m&loyerHs interest in any amounts so retained shall be fiduciary as trustee for the Contractor (but without obligation to in+est" and the ContractorHs beneficial interest therein shall be sub6ect only to the right of the 8m&loyer to ha+e recourse thereto from time to time for &ayment of any amount which he is entitled under the &ro+isions of this Contract to deduct from any sum due or to become due to the Contractor' (b) On the issue of the Certificate of Practical Com&letion the Architect shall issue a certificate for one moiety of the total amounts then so retained and the Contractor shall, on &resenting any such certificate to the 8m&loyer, be entitled to &ayment of the said moiety within the Period for >onouring Certificates named in C the a&&endi5 to these Conditions' and using this clause as a le+erage the &laintiff submitted that the defendant was in fact that the first moiety be de&osited into court until the conclusion of the

holding the retention monies as a trustee and in a fiduciary ca&acity' It was further submitted that the retention monies held by the defendant be de&osited in a se&arate ban$ account until the conclusion and dis&osal of the trial' A #he &laintiff relied on a number of Commonwealth authorities in su&&ort of these

submissions and I shall now refer to them, not in its order of &riority' (or a start, I shall refer to the 6udgment of Peh -wee Chin ; (as he then was" in the case of Lee (am C#un ' !/arikat (uku# Ma9u !dn "#d F3ACCG 3 ME; 777' At & 77C of the re&ort, his Eordshi& had this to sayB Again, the retention money concerned herein is declared by Clause )0 (7"(a" as being money held by the garnishee on trust for the 6udgment debtor' #he im&lication would be ine+itable that the retention money would belong

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beneficially to the 6udgment : debtor' In fact, in Ra/ack Construction Ltd. ' Lam eter Meat Co Ltd (3A,A" 32 .E* )7, a clause identical to Clause )0(7"(a" herein came u& for the courtHs inter&retation in connection with a declaration being sought by a contractor from the court as regards his em&loyer that the em&loyer was obliged to &ay the retention sum into a se&arate ban$ account to hold the same in trust for the contractor and conse4uential in6unctions, 1inelott ; allowed the declaration there' #he ob6ect would a&&ear to ensure that any &otential 6udgment creditor of the em&loyer would not e5ecute in error his 6udgment on such retention sum' One cannot lose sight of the fact also that the retention sum was deducted for +alue of wor$ already and actually done and materials already and actually su&&lied as certified by the architect to be due' In my 6udgment, the retention sum in this case is an e5isting debt and in fact an e5isting indebted sum that in+ol+es the &ayment, notionally and irresistibly &ursuant to an interim certificate issued by the architect, by the garnishee to the 6udgment:debtor and the latterHs &ayment in turn bac$ to the garnishee for retention for &ur&oses already stated, with the garnishee holding the money as trustee for the 6udgment debtor' A debt in res&ect of such money began to e5ist in the circumstances and still does e5ist, and to contend 30 otherwise would be to defy common sense and logic' #his would be followed by the case of Concords Construction Co Ltd ' Co$%an Co

Ltd (3AC7" 2A .E* 320, a decision of the >igh Court of >ong <ong' In that case, the court held that unless there were any s&ecial circumstances, the &laintiffs were entitled to insist that the em&loyer set aside retention money in a se&arate trust fund for the benefit of the &laintiffs following closely the decision of Ra/ack Construction Ltd ' Lam eter Meat Co Ltd (3A,A" 32 .E* )0' #he court too held that the defendants were not entitled to ha+e recourse to the trust fund sim&ly because of their contention that they were entitled to such money by reason of the defects alleged? and flowing from this, the court held that although the defendantsH case were arguable it was also &urely s&eculati+e and it ought not to defeat the &laintiffs re4uest' 33 (ollowing the dicta of Eord /&6ohn in the case of Red$and "ricks Ltd ' Morris F3A,0G

AC 6=) at 637, the court also held that an in6unction to force an em&loyer to set u& a trust fund

14

of retention moneys where Clause )0(7"(a" of the >ong <ong conditions (in pari materia with Clause )0(7"(a" of the PAM contract" a&&ly and where there were no substantiated heads of deductions then the in6unction should normally be granted Das of courseD' 32 (inally, the court held that although the grant of interim in6unction was discretionary the

broad &rinci&le to be a&&lied was that the court should do its best to a+oid in6ustice and at the same time to balance the ris$ of doing an in6ustice to either &arty following closely the case of Ca/ne ' G$o.a$ ,atura$ Resources F3AC7G 3 AII 8* ,2=' It is instructi+e to cite a &assage of *hind ; who deli+ered the 6udgment of Concords Construction Co Ltd ' Co$%an Co Ltd (supra" that a&&ears at & 3)= of the re&ort, and it is worded as followsB It is ridiculous to suggest that the main contractor can only insist on the trust being set u& if it can adduce e+idence of some sha$iness in the em&loyerHs financial &osition' If the main contractor had to wait till such e+idence was forthcoming it would often by then be too late to ta$e ste&s which would result in the fund being secured' *atherthan re4uiring the main contractor to show that the horse is showing signs of bolting, the courts allow it to ta$e ste&s to ha+e the stable door shut while there is still no suggestion of anything being amiss' In as$ing for a trust fund to be set u&, the main 3) contractor is merely acting &rudently' 9e5t, it would be the case of )F Finne%an Ltd ' Ford !e$$ar Morris &e'e$o ments

Ltd: )F Finne%an Ltd ' La7 ;< Ltd (3AA3" )) .E* )C, a decision of ;udge 8syr Eewis !C' In that case the &laintiff had filed an a&&lication as$ing the court to order that the retention monies be &aid into a se&arate account and had a&&lied for an interlocutory in6unction to legally com&el the defendant to do so' #he court allowed the a&&lication and granted the in6unction sought since to withhold the in6unction, in the circumstances of the case, carried a greater ris$ of in6ustice than the granting of it' At & 7A of the re&ort' ;udge 8syr Eewis !C remar$edB I consider, therefore, that once the em&loyer indicates that he is e5ercising his right to retain a &ercentage of the sum due to the contractor when ma$ing an interim &ayment, the contractor is entitled at any time to re4uest the em&loyer to &lace the retention in a se&arate ban$ing account and he is not obliged to ma$e re&etiti+e re4uests that this should be done each time an interim &ayment is made'

15

37

#his would be followed by the case of Mac=)ordan Construction Ltd ' "rookmount

-rostin Ltd (3AA3" =6 .E* 6, a decision of the Court of A&&eal that was deli+ered by -cott E;' At & 33 of the re&ort, -cott E; referred to the decision of .eldam E; in 0a$es Construction 4London5 Ltd ' Frant#om 2ro ert/ Ltd (3AA3" =) .E* 2), in &articular to & )6 of the re&ort where .eldam E; had this to sayB '''' the only way in which the interest of the beneficiaries (the contractor and sub:contractors" in the retention fund could be safeguarded and &reser+ed is 3= if that fund is &laced in a se&arate account '''' 9e5t, it would be the case of 0a$es Construction 4London5 Ltd ' Frant#om 2ro ert/

Ltd (3AA3" =) .E* 2), a decision of the Court of A&&eal com&rising of .eldam and 9olam E;;' In that case, the &laintiff had issued a writ and claimed an in6unction re4uiring the defendant to &lace the retention fund into a se&arate account and the court held that the em&loyerHs duty was to safeguard the interests of the beneficiaries and it would ha+e been a breach of trust to sim&ly a&&ro&riate the money and use it as a wor$ing ca&ital' #he court also stressed and laid em&hasis to the fact that the right to trace de&ended u&on the ability to identify the fund into which the money had been &laced' At && )6 to ), of the re&ort' .eldam E; succinctly saidB #he &ro+isions in the contract between the &arties in this case seem to me to be indistinguishable in their effect from the &ro+ision in the case of Ra/ack Construction Ltd ' Lam eter Meat Co Ltd (3A,A" 32 .E* )7' #hat was a decision at first instance of 1inelott ; in which he had to construe a clause the effect of which was, as I ha+e said, in my +iew indistinguishable' #he &laintiff contractors in that action were claiming a declaration that they were entitled to be &aid forthwith' #here was a mandatory in6unction ordering the em&loyers to &ay the retention fund into a se&arate ban$ account and to a&&ly the retention monies in accordance with the trust which was s&ecified in a condition of the contract between the &arties in that case' In &articular, I would refer to the reasons gi+en by 1inelott ;, with which I agree, at & )C for the &ro+isions for retention in the contract' >e saidB If sub:clauses ()" and (7" of condition )0 are read together, it is in my 6udgment clear that the &ur&ose of the &ro+isions for retention under the terms of Condition )0(7"(a" is to &rotect

16

both em&loyer and contractor against the ris$ of insol+ency of the other' #he em&loyer is &rotected by his right to retain a &ro&ortion of the sum certified as due in res&ect of wor$ done against the ris$ that claims in res&ect of any failure to carry out the architectHs instructions or in res&ect of delay or other breaches of the contractorHs obligations will, in the e+ent of the contractorHs insol+ency, ran$ as unsecured debts' #he contractor is &rotected by the &ro+isions of Condition )0(7"(a" against the ris$ that his claim for &ayment of monies retained by the em&loyer will similarly ran$ as an unsecured debt, sa+e only for the lien conferred by the &ro+iso to condition 26(2"' #hus, both are &rotected if and to the e5tent that the em&loyer carries out his obligation to set aside as a se&arate trust fund a sum e4ual to the retention monies' #he contractor must be e5&osed to some degree of ris$ 6eo&ardy if that is not done' It would in my 6udgment be wrong that he should continue to be e5&osed to this ris$ until the trial of the action' #he reasoning in Ra/ack Construction Ltd ' Lam eter Meat Co was followed by 9ourse ; (as he then was" in the case of Re )arta/ &e'e$o ments (3AC)" 22 .E* 3)7,and again in Re Art#ur !aunders Ltd (3AC3" 3, .E* 32=' It was also followed in a case in the >igh Court of >ong <ong in Concorde Construction Co Ltd ' Co$%an (3AC7" 2A .E* 320' #he cases were mentioned without disa&&ro+al by this court in the case of Henr/ "oot "ui$din% ' Cro/don Hote$ 3 Leisure Co Ltd (3AC=" )6 .E* 73' In my 6udgment Clause )0'='3 creates a clear trust in fa+our of the contractor and sub:contractors of the retention fund of which the em&loyer is the trustee' #he em&loyer would be in breach of his trust if he haMarded the fund by using it in his business and it is his first duty to safeguard the fund in the interests of the beneficiaries' I would hold the contractors entitled to the &rotection which they see$ and I would dismiss the a&&eal'

17

36

#o summarise, there a&&ears to be a discernible trend in the long line of cases begining

with the case of Ra/ack Construction Ltd ' Lam eter Meat Co Ltd (supra" where the courts ha+e by an order in the nature of mandatory in6unctions re4uired the em&loyers to &lace the retention monies in se&arate ban$ accounts so as to &rotect the interests of the contractors' 3, #wo more authorities relied u&on by the &laintiff must be mentioned' #he first would be

the case of Re )arta/ &e'e$o ments Ltd (3AC2" 22 .E* 3), where the &laintiff had sought a declaration that the defendant should &ay the retention monies as and when those monies were certified in a se&arate ban$ account and the court allowed the a&&lication' #he second would be the case of Re Tout and Finc#: Ltd F3A=7G All 8* 32, where the court construed Clause 33(h" of the *oyal Institute of .ritish Architects conditions of contract as a trust which would o&erate by way of an e4uitable assignment of assets described as the contractorHs interest in the retention money' 9ow, all the authorities alluded to abo+e, so the submissions went, when a&&lied to the &arties in the &resent case would mean that the defendant was in actual fact holding those retention monies as a trustee and did so in a fiduciary ca&acity' As such, those retention monies, according to the authorities and according to the submissions, ha+e to be de&osited into a se&arate account for the following reasonsB 3' 2' for the setting u& of a trust fund? for the &reser+ation of those retention monies until the final conclusion of the trial? )' 7' to ensure that those retention monies are not to be misa&&ro&riated? to safeguard the contractor and to &re+ent him from being e5&osed to the ris$ of 6eo&ardy if the necessary &recaution was not underta$en? and =' same' 2 #hat was not the end of the matter' #he defendant held o&&osite +iews' Miss Annabel C> Chua, learned counsel for the defendant, in a classic show of bra+ado submitted that the contract between the &arties, if it was not +oid or unenforceable, would readily ga+e rise to a trust' >owe+er, she rightly em&hasised that there were no trust monies to be &laced in a se&arate identifiable account for the following reasonsB to be able and ca&able of tracing those retention monies and identify the

18

a'

since the &laintiff &rocured the contract by fraud, the contract became +oid

and unenforceable? b' since the &laintiff did not &lead a breach of trust in the statement of claim, the &laintiff was not entitled to the remedies sought by them? and c' alternati+ely, in the e+ent the contract was not +oid nor unenforceable for

fraud, then by +irtue of the certificate of &ractical com&letion the first moiety of the retention sum was not ca&able of being &laced into a se&arate account' 3C It must be recalled that the defendant had set out the &articulars of fraud if a the statement

of defence and the counterclaim as alluded to earlier' #he same &articulars of fraud were also re&eated in 8ncl 62' .ut unfortunately the &laintiff saw it fit not to rebut the &articulars of fraud in their 8ncl 60 sa+e as to say that the defendant cannot con+eniently turn the affida+it e+idence into a mini trial and that the burden of &ro+ing fraud was said to be on the higher side namely, beyond reasonable doubt (!aminat#an ' 2a a F3AC3G 3 ME; 323"' Miss Annabel C> Chua rightly submitted on the authority of ,% Hee T#oon% ' 2u.$ic "ank "#d F3AA=G 3 AM* 622 that the failure of the &laintiff to contradict an allegation amounted to an admission of the fact so asserted' #he failure to rebut the defendantHs a+erments in &aragra&hs 6, ,, and C of 8ncl 63 meant that the &laintiff had admitted to the fact of &rocuring the contract by fraud' Io&al -ri *am ;CA in Hock Hua "ank 4!a.a#5 "#d ' Yon% Liuk T#in F3AA=G 2 AM* 3))2, at 3))A a&tly saidB hene+er a court is re4uired to 6udicially a&&reciate affida+it e+idence, it is a necessary ad6unct of that function to ascertain whether allegations made are inherently im&robable or inherently incredible or &atently inconsistent with contem&oraneous documents' hether such an analysis ought to be underta$en de&ends u&on the 6urisdiction the court is e5ercising and, more im&ortantly, u&on the &articular facts of a case' It is &art of the function of a 6udge hearing an a&&lication for an in6unction to decide whether a serious 4uestion re4uiring trial is disclosed' >e therefore does not e5ceed his &ro&er role in such an interlocutory &roceeding by commenting u&on the credibility of the e+idence or any issue as it lies before him at that stage'

19

3A

In short, the unrebutted affida+it e+idence of the defendant clearly showed that the

&laintiff had admitted to the e5istence of the fraud' #hat being the case, the contract on the strength of the affida+it e+idence was +oid and unenforceable for fraud '#his was the submission of Miss Annabel C> Chua for the defendant' It would be ideal that fraud be &ro+ed in o&en court in the course of the trial' -ection 3, of the Contracts Act 3A=0 sets out fi+e situations wherein DfraudD may arise and it is worded thusB 1>. H(raudH includes any of the following acts committed by a &arty to a contract, or with his conni+ance, or by his agent, with intent to decei+e another &arty thereto or his agent, or to induce him to enter into the contractB (a) the suggestion, as to a fact, of that which is not true by one who (b) (c) (d) (e) does not belie+e it to be true? the acti+e concealment of a fact by one ha+ing $nowledge of belief of the fact? a &romise made without any intention of &erforming it? any other act fitted to decei+e? and any such act or omission as the law s&ecially declares to be

fraudulent' #xplanation ! Mere silence as to facts li$ely to affect the willingness of a &erson to enter into a contract is not fraud, un less the circumstances of the case are such that, regard being had to them, it is the duty of the &erson $ee&ing silence to s&ea$, or unless his silence is, in itself, e4ui+alent to s&eech'

$%%&S'()'$O*S (a) ) sells, by auction, to +, a horse which ) $nows to be unsound' ) says nothing to + about the horseHs unsoundness' #his is not (b) fraud in ). + is ),s daughter and has 6ust come of age' >ere, the relation between the &arties would ma$e it ),s duty to tell + if the horse (c) is unsound' + says to ), HIf you do not deny it, I shall assume that the horse

20

is sound'H ) says nothing' >ere, ),s silence is e4ui+alent to (d) s&eech' ) and +, being traders, enter u&on a contract' A has &ri+ate information of a change in &rices which would affect +,s willingness to &roceed with the contract' ) is not bound to inform +. 20 In the conte5t of a land transaction, Eord .uc$master in the Pri+y CouncilHs case of

0aimi#a !a7mi$$in% Co ' 0aione Tim.er Co F3A26G AC 303, a&tly said at & 306:30, the followingB If the designed ob6ect of a transfer be to cheat a man of a $nown e5isting right, that is fraudulent, and so also fraud may be established by a deliberate and dishonest tric$ causing an interest not to be registered and thus 23 fraudulently $ee&ing the register clear' Professor 1isu -innadurai in his boo$ entitled %aw of -ontract in .alaysia and

Singapore/ -ases and -ommentary, (2nd 8dn, 3AC," .utterworths, at Cha&ter = e5&lained that the definition of fraud under s 3, of the Contracts Act 3A=0 are wider than the acce&ted definition of fraud under s )70 of the 9ational Eand Code (Act = 6 of 3A6="' -ir *ichard Couch in 2erta. C#under G#ose ' Mo#endra 2urkait (3CCC:CA" 36 IA 2)) while deli+ering the 6udgment of the Pri+y Council said at & 2), of the re&ortB here one &arty induces the other to contract on the faith of re&resentations made to him, anyone of which is untrue, the whole contract is, in a Court of 22 e4uity, considered as ha+ing been obtained fraudulently '''' It is also interesting to refer to the case of AG o1 Hon% (on% ' Aoki Construction Co

Ltd (3AC3" 2) .E* C3? (3AC3" ><E* 6)= which echoed the same sentiment' .e that as it may, the u&shot of it all were theseB the conditions set out in the PAM contract were not a&&licable and the &ro+isions of Clause )0(7" of the PAM contract did not bind the &arties at all and there was no obligation to set aside any retention monies in a se&arate identifiable account' #his was my 6udgment and I so hold accordingly' 2) #he defendant continuously and obstinately held the +iew that the &laintiff &rocured the

contract by fraud' It was an intractable stand' #he >ouse of Eords in &err/ ' 2eek (3CCA" 37

21

A&& Cas )), laid down the &rinci&le that for fraud to be established, it was necessary to &ro+e the absence of an honest belief in the truth of that which has been stated' At & ),7 of the re&ort' Eord >erschell a&tly remar$ed that fraud is &ro+ed when it is shown that a false re&resentation has been made (3" $nowingly, or (2" without belief in its truth, or ()" rec$lessly, careless whether it be true or false' 27 #he court in Master ' Mi$$er (3,A3" 7 #erm *e& )20, )2A laid down a sound &rinci&le of

law to the effect that no man shall be &ermitted to ta$e the chance of committing fraud, without 2= case' 26 In regard to the breach of trust, it was clearly not &leaded by the &laintiff in the statement running any ris$ of losing by the e+ent, when it is detected' #hese general &rinci&les of law would certainly a&&ly to the factual matri5 of the &resent

of claim and its &articulars were also not set out thereto' Order 3C r 32 of the *>C categorically states as followsB (3" -ub6ect to &aragra&h (2", e+ery &leading must contain the necessary &articulars of any claim, defence or other matter &leaded including, without &re6udice to the generality of the foregoing words : (a) &articulars of any misre&resentation, fraud, breach of trust, wilful default or undue influence on which the &arty &leading relies? and (b) where a &arty &leading alleges any condition of the mind of any &erson, whether any disorder or disability of mind or any malice, fraudulent intention or other condition of mind e5ce&t $nowledge, 2, &articulars of the facts on which the &arty relies' and it re4uires that litigation between the &arties should be conducted fairly, o&enly and

without undue sur&rises and, conse4uently, to reduce costs (see the s&eech of 8dmund %a+ies E; in Astro'$anis Com ania ,a'iera !A ' Linard F3A,2G 2 !. 633, F3A,2G 2 All 8* 67,"' Other 6udges followed suit' It was not a new idea' 8dmund %a+ies E; merely ado&ted the same basic

22

idea and im&ro+ed on it' Other brilliant 6udges before 8dmund %a+ies E; had this to say in regard to the function of &articularsB a' to inform the o&&osite side of the nature of the case that they ha+e to meet

(per Eindley E; in &uke ' 0isden (3CA," ,, E# 6,, 6C? per .uc$ley E; in Youn% 3 Co ' !cottis# Union Co (3A0," 27 #E* ,), ,7, and A%a (#an ' Times 2u.$is#in% Co F3A27G 3 <. 6,=, 6,A"' b' to &re+ent the other side from being ta$en by sur&rise at the trial ( per Cotton E; in ! eddin% ' Fit6 atrick F3CCCG )C Ch% 730,73)? and T#omson ' "irk$e/ (3CC2" )3 c' * 2)0"?

to alert the o&&osite &arty of the $ind of e+idence they ought to be ' Ho$ds7ort# F3C,6G ) Ch% 6),? -$kin%ton ' London

&re&ared with and with that $nowledge to ade4uately &re&are for trial ( per ;essel M* in T#or Association 1or t#e 2rotection o1 Trade (3A33" 2, #E* )2A, ))0"? d' to circumscribe and limit the generality of the &leadings as a whole ( per #hesiger E; in !ounders ' )ones F3C,,G , Ch % 7)="? e' to circumscribe the claim and the $ind of e+idence that has to be led

(Mi$.ank ' Mi$.ank F3A00G 3 Ch ),6, )C="? f' to strictly limit and define the issues to be tried and the $ind of disco+ery that should be made (per 1aughan illiams E; in Mi$.ank ' Mi$.ank (supra"? and Yorks#ire 2ro'ident Li1e Assurance Co ' Gi$.ert F3CA=G 2 !. 37C"? and g' to restrict and tie the hands of both &arties so that they cannot go astray unless with lea+e of the court (per .rett E; in 2#i$i 32,, 3)) and 0oo$e/ ' "road F3CA2G 2 !. )3,"' 2C I may add that in e+ery &leading, a certain amount of detail is indeed necessary so as to ords s ' 2#i$i s F3C,CG 7 !.%

ensure clearness and to &re+ent sur&rise at the trial' Precision is the name of the game' o&&onent must $now what he is u& to'

must be em&loyed to con+ey the e5act meaning' #here should not be any confusion at all' An hat &articulars need to be stated must surely be de&endent on the facts of each case' In the conte5t of the &resent case, the &laintiff must &lead all the rele+ant facts to show a dishonest breach of trust' #he &laintiff too must clearly and une4ui+ocally &lead $nowledge on the &art of the defendant of the dishonesty of that breach of

23

trust' .ut alas, the &laintiff had defaulted' #here was a blatant failure to &lead either the breach of trust or the &articulars of the breach and so the &laintiff was not entitled to the remedies sought by them' 2A It must be em&hasised that the defendant only disco+ered that the &laintiff had &rocured

the contract by fraud after it found the letters e5hibited as DA*3D and DA*2D to 8ncl 62' #his ha&&ened after the &ur&orted D&ractical com&letionD of the contract' It cannot be said that the defendant was dragging its feet' #he &laintiff made no effort at all to rebut the facts as stated in 8ncl 62 and yet the &laintiff had the audacity to com&lain that the defendant was raising the issue of fraud' #he law weighed hea+ily on the side of the defendant' -ince the &laintiff did not rebut the facts as alluded to by the defendant, the &laintiff must be deemed to ha+e admitted those facts (A.du$ Ra6ak A#mad ' Ma9$is "andara/a )o#or "a#ru F3AA=G 2 AM* 33,7 and ,% Hee T#oon% ' 2u.$ic "ank "#d (supra""' #he &laintiff had not contro+erted nor rebutted the issue of fraud' A fact is not rebutted by sim&ly saying that it is irrele+ant or raised in the im&ro&er forum' A fact is also not rebutted by merely alleging that the defendant is trying to resile from its allegations' )0 .asically, the &laintiffs cause of action was grounded on a reco+ery of a debt which the

defendant +ehemently dis&uted' #he first moiety was said to be a debt' As a debt, it had no &riority or &ri+ilege o+er other debts that were due to the &laintiff such as those debts that were certified as due by the architect in the interim certificates bearing numbers 3C to 22' Indeed, if the &laintiff was interested in &reser+ing the status "uo, why was the &laintiff only as$ing for the first moiety to be &laced in a se&arate account, and not all of the certified sums certified by the architect in the interim certificates bearing numbers 3C to 22N #o accede to the &laintiffs a&&lication in 8ncl =2 would o&en the floodgates for building contractors to hastily come to the courts see$ing orders for the debts to be &reser+ed &ending the trial of the actions' In my 6udgment, as a debt the first moiety was not ca&able of being &laced in a se&arate identifiable account' Order 2A r 2(3" of the *>C gi+es a discretion to this court to refuse to accede to the a&&lication in 8ncI =2' I accordingly e5ercised my discretion in fa+our of the defendant and dismissed 8ncl =2, &aragra&hs 3 and 2 with costs'

Cases

24

Pembenaan Eeow #uc$ Chui L -ons -dn .hd + %r EeelaHs Medical Centre -dn .hd F3AA=G 2 AM* 32CA -C? %erry + Pee$ (3CCA" 37 A&& Cas )),? Abdul *aMa$ Ahmad + Ma6lis .andaraya ;ohor .ahru F3AA=G 2 AM* 33,7? AI of >ong <ong + Ao$i Construction Co Etd (3AC3" 2) .E* C3? (3AC3" ><E* 6)=? Aga <han + #imes Publishing Co F3A27G 3 <. 6,=? Astro+lanis Com&ania 9a+iera -A + Einard F3A,2G 2 !. 633? F3A,2G 2 All 8* 67,? Cayne + Ilobal 9atural *esources F3AC7G 3 All 8* ,2=? Cha&lin + .anett (3A32" 2C #E* 2=6? Chief Constable of <ent + 1 F3AC2G 2 All 8* )6? Cobert Etd + > <umar (3AA2" =A .E* CA? Concords Construction Co Etd + Colgan Co Etd (3AC7" 2A .E* 320? %u$e + Eiu$ #hin F3AA=G 2 AM* 3))2? > isden (3CA," ,, E# 6,? 8l$ington + Eondon illiam Press L -on Etd (3AC3" 20 Association for the Protection of #rade (3A33"2, #E* )2A? >oc$ >ua .an$ (-abah" .hd + Oong 9e+ill (-unblest" Etd + .E* ,C? ;artay %e+elo&ments Etd, *e (3AC2" 22 .E* 3),? ;( (innegan Etd + (ord -ellar Morris %e+elo&ments Etd, ;( (innegan Etd + Eaw AC Etd (3AA3" =) .E* )C? Eee <am Chun + -yari$at <u$ah Ma6u -dn .hd (-yari$at Perumahan Pegawai <era6aan -dn .hd, Iarnishee" F3ACCG 3 ME; 777? Mac:;ordan Construction Etd + .roo$mount 8rostin Etd (3AA3" =6 .E* 6? Master + Miller (3,A3" 7 #erm *e& )20? Milban$ + Milban$ F3A00G 3 Ch ),6? 9g >ee #hoong + Public .an$ .hd F3AA=G 3 AM* 622? 9icholas + Can *ealty -dn .hd F3A,0G 2 ME; CA? P L M <aye Etd + >osier and %ic$inson Etd F3A,2G 3 AII 8* 323? F3A,2G 3 E* 376? Pertab Chunder Ihose + Mohendra Pur$ait (3CCC:CA" 36 IA 2))? Phili&&s + Phili&&s F3C,CG 7 !.% 32,? Polini + Iray F3C,AG 32 Ch % 7)C? *ayac$ Construction Etd + Eam&eter Meat Co Etd (3A,A" 32 .E* )0? *edland .ric$s Etd + Morris F3A,0G AC 6=)? - + -, + Official -olicitor F3A,0G ) All 8* 30,? -aminathan + Pa&&a F3AC3G 3 ME; 323? -ounders + ;ones F3C,,G , Ch% 7)=? -har&e + -an Paulo *ly Co (3C,)" E* C Ch A&& =A,? -&edding + (itM&atric$ F3CCCG )C Ch % 730? #an Eay -oon + <am Mah #heatre -dn .hd (Malayan /nited (inance .hd, Inter+ener F3AA2G 3 AM* )0? #homson + .ir$ley (3CC2" )3 303? * 2)0? #hor& + >olds:worth F3C,6G ) Ch% 6),? #out and aimiha -awmilling Co + aione #imber Co F3A26G AC est (inch, Etd, *e F3A=7G All 8* 32,? Mercia Constabulary +

ales Construction (Eondon" Etd + (ranthom Pro&erty Etd (3AA3" =) .E* 2)? agener F3AC3G ) All 8* ),C? E* 6),? ooley + .road F3CA2G 2 !. )3,?

estminster City Council + ; ;ar+is L illiams

-ons Etd F3A30G 3 AII 8* A7)? F3A,0G 3

+ (itMmaurice (3C=C" ) > L 9 C77? Oor$shire Pro+ident Eife Assurance Co + Iilbert F3CA=G 2 !. 37C? Ooung L Co + -cottish /nion Co (3A0," 27 #E* ,)'

25

Le%is$ations Contracts Act 3A=0B s'3, 9ational Eand Code 3A6=B s')70 *ules of the >igh Court 3AC0B Ord'3C r 32, Ord'2A r 2 Aut#ors and ot#er re1erences 1isu -innadurai, Eaw of Contract in Malaysia and -inga&oreB Cases and Commentary, 2nd 8dn, 3AC,, .utterworths Re resentations *an6an Chandran and %hanara6 -i+asam&u (>a$em Arabi L Associates" for Plaintiff Annabel C'>' Chua (AMman, %a+idson L Co" for %efendant ,otes?= #his decision is also re&orted at F2000G ) AM* )26A

HIGH COURT OF MALAYA Gasin% Hei%#ts !dn "#d - vs 2i$econ "ui$din% Construction !dn "#d Coram FAI@A TAM"Y CHI( ) )ud%ment *A ,OV-M"-R 1;;;

Fai6a Tam./ C#ik )

26

3'

#his

is

an

originating

motion

dated

-e&tember

2,

3AAA

(8ncl

3"

see$ing inter alia orders that interim award 9o 2B a' b' 2' be set aside, or be remitted to the learned arbitrator for reconsideration'

Interim award 9o 2 is set out in the a&&licantHs affida+it dated -e&tember ,, 3AAA

(8ncl 2 & C= 85h C-> 33"' Casing >eights -dn .hd, the a&&licant in this originating motion (Dthe a&&licantD" is the owner and de+elo&er of a &ro6ect $nown asB Carrying out and Com&leting the Main .uilding or$s of the Pro&osed

Condominium %e+elo&ment (Phase 2" on sub:lots P# 62=:6)2, 673:67) and 67=:67C, -ection =, Mu$im =, Petaling ;aya, -elangor %arul 8hsan (DPro6ectD"' )' and the res&ondent, Pilecon .uilding Construction -dn .hd, the res&ondent in

this originating motion (Dres&ondentD", is a contractor by business and trade' 7' Pursuant to a building contract dated March 2, 3AA7 (Dbuilding contractD", which

incor&orated the standard PAM (orm 3A6A edition (DPAM (ormD", the a&&licant a&&ointed the res&ondent as contractor to carry out the wor$s for the &ro6ect (D&ro6ect wor$sD"' %is&utes arose between the a&&licant and the res&ondent with res&ect to the building contract and the &ro6ect wor$s, whereu&on arbitration &roceedings (DarbitrationD" were commenced' #he &arties in the arbitration areB a' b' =' #he res&ondent in the arbitration is the a&&licant herein? #he claimant in the arbitration is the res&ondent herein'

.y the 6oint letter of a&&ointment dated -e&tember ,, 3AA=, the arbitrator was

selected, a&&ointed and was re4uired to &ublish written reasoned awards (as o&&osed to granting silent awards"' (-ee a&&licantHs affida+it dated -e&tember ,, 3AAA 8ncl 2 & 2, 85h C->:)"' 6' %uring the arbitration, the arbitrator was re4uired to render his decision with

res&ect to issue 9o 2, which by agreement and consent of the &arties issue 9o 2 is set out in the arbitratorHs directions dated 9o+ember 3,, 3AAC, wherein the arbitrator was

27

re4uired to ascertain facts and conse4uences thereof' (-ee a&&licantHs affida+it 8ncl 2, & )) 85h C->:6"' Interim award 9o 2 was &ublished on August 20, 3AAA' award 9o 2 &ursuant to s 2) and s 27 of the arbitration Act 3A=2' ,' In deciding whether to set aside or to remit an arbitratorHs award, the court will not hereu&on, the a&&licant filed this originating motion see$ing inter alia to set aside or remit interim

generally e5amine or go into the facts and merits of the arbitration' #he court will &rimarily confine its attention to the content of the award' #he court will not set aside an arbitratorHs ad6udication sim&ly because the court would itself ha+e come to a different conclusion' #he court will howe+er set aside an arbitratorHs decision if it is shown that there is an Derror of law on the face of the award'D C' In Go'ernment o1 (e$antan ' &u11 &e'e$o ment Co Ltd F3A2)G AC )A= P

70A, the >ouse of Eords saidB If this be so, I thin$ it follows that, unless it a&&ears on the face of the award that the arbitrator has &roceeded on &rinci&les which were wrong in law, his conclusions as to the construction of the deed must be acce&ted' 9o doubt an award may be set aside for an error of law a&&earing on the face of it? and no doubt a 4uestion of construction is (generally s&ea$ing" a 4uestion of law' .ut whereas 4uestion of construction is the +ery thing referred for arbitration, then the decision of the arbitrator u&on that &oint cannot be set aside by the court only because the court would itself ha+e come to a different conclusion' If it a&&ears by the award that the arbitrator has &roceeded illegally : for instance, that he has decided on e+idence which in law was not admissible or on &rinci&les of construction which the law does not countenance, then there is error in law which may be ground for setting aside the award? but the mere dissent of the Court from the arbitratorHs conclusion on construction is not enough for that &ur&ose' A' It is an error if reference is made to inadmissible e+idence' #here is an Derror of

law on the face of the awardD, if the arbitrator refers to e+idence that is not legally admissible' It is an error if &rinci&les of construction not countenanced by the law are

28

a&&lied' #here is also an Derror of law on the face of the awardD, if the arbitrator a&&lies &rinci&les not &ermitted or recognised by the law' 30' 33' #he e5&ression Don the face of the awardD should not be inter&reted restricti+ely' #he case of C#iam Tau T6e ' T#e !ara7ak Land Conso$idation 3

Re#a.i$itation Aut#orit/ F3AA)G ) CE; 60= +ery clearly states that the e5&ression Don the face of the awardD will include documents and e+idence incor&orated into the award or referred to in the award by the arbitrator as a basis for his decision' At & 630 (right" *ichard Malan6urn ; saidB >owe+er, reference to e5trinsic e+idence has been incor&orated in the award ''' And on &erusal of the award 9o 2 in this case there is no doubt that the learned arbitrator did ma$e reference to the &oints of defence not only by way of elaboration or itemisation but also as a basis for ma$ing the award 9o 2' In other words, the award 9o 2 Dcan really only be understood by referenceD to the &oints of defence' (-eeB "e$s1ie$d Court Construction Co Ltd ' 2/7e$$ FsupraG"' I rule therefore that the &oints of defence should be ta$en as ha+ing been incor&orated in the award 9o 2 32' In other words, if an award refers to a document or e+idence as the basis for the

decision, or the decision of the arbitrator can only be understood by reference to that document or e+idence, then that document or e+idence is deemed incor&orated into the award and become a+ailable for re+iew by the court' 3)' (or an understanding of what is meant by Dincor&oration into an awardD,

reference is made to "e$s1ie$d Court Construction Co Ltd ' 2/7e$$ F3A,0G 3 All 8* 7=) which was cited with a&&ro+al in C#iam Tau T6e. In "e$s1ie$d Court Construction illis ; said at & 7==B

I sim&ly refer for the &ur&oses of this &art of counsel for the claimantsH submission to what %enning E; said in the "$ai.er caseB I ha+e a strong sus&icion that the arbitrators went wrong in law, but we are not able to say so without loo$ing at the contract,

29

because the terms of the contract may +ary the ordinary legal rights and im&lications' #he difficulty is that we are not at liberty to see this contract' It is not e5&ressly incor&orated into the award, nor can I see that it is im&liedly incor&orated' #he 4uestion whether a contract, or a clause in a contract, is incor&orated into an award is a +ery difficult one' As I read the cases, if the arbitrator saysB DOn the wording of this clause I holdD so:and:so, then that clause is im&liedly incor&orated into the award because he in+ites the reading of it? but if an arbitrator sim&ly saysB DI hold that there was a breach of contractD, then there is no incor&oration' In this case there is sim&ly a recital of a contract which is not incor&orated into the award and therefore we cannot loo$ at it' I ha+e no regrets on this score' 37' #herefore in the instant case, the res&ondent has referred to e+idence and K or

documents, so incor&orated by the arbitrator into interim award 9o 2' 3=' #he res&ondent (as contractor" alleged as followsB a' #hat originally, the res&ondent was to construct the #9. substation at

location DAD' b' #hat the a&&licantHs architect then issued &ur&orted late instructions

re4uiring the res&ondent to Drelocate the #9. substationD to location D.D? c' #hat his &ur&orted late instruction for the Drelocation of the #9.

substationD caused delay to the res&ondentHs &ro6ect wor$s? d' #hat the days e5tension of time (D8O#D" granted by the architect for the

Drelocation of the #9. substationD was insufficient and re4uired the arbitrator to assess the &ro&er 8O# due to the res&ondent ' (see interim award 9o 2 & = &aragra&h . to & , &aragra&h % in a&&licantHs affida+it 8ncl 2, 85h C-> 33, & CA:A3"' 36' #he a&&licant (as em&loyer" in defence contended inter alia as followsB

30

a'

#hat the Drelocation of the #9. substationD only caused minimal delay to

the claimant and the architect had awarded reasonable 8O# to the res&ondent? b' #hat the res&ondentHs own witness (DC 3D" had admitted in cross:

e5amination, that the res&ondent only started wor$ on the #9. substation about one month after the res&ondent had recei+ed all the instruction and drawings re4uired to commence wor$ on the Drelocated #9. substationD' #his &ro+ed that e+en when the architectHs instructions and all the re4uired drawings were issued to the res&ondent (as contractor", the res&ondent were in fact not ready to commence wor$ on the #9. substation' #hus delay (if any" caused by the relocation of the #9. substation was minimal (if at all" and there should be no increase in the 8O# granted by the architect' #hat this admission by C in any way through out the arbitration' (-ee interim award 9o 2 & , &aragra&h 8 to & 3) &aragra&h % in a&&licantHs affida+it 8ncl 2, 85h C-> 33, && A3:A,"' 3,' It is obser+ed that the res&ondent had recei+ed all the instruction and drawings for 3 was ne+er e5&lained or rebutted by the res&ondent whether by re:e5amination or documentary e+idence

the Drelocated #9. substationD by March C, 3AA7 is a finding of fact by the learned arbitrator' (-ee interim award 9o 3 & ), &aragra&h ='2 in a&&licantHs affida+it 8ncl 2, 85h C->:,, & )C", and that the res&ondent only commenced wor$ on the #9. substation in A&ril 3AA7 is also a finding of fact by the arbitrator' (-ee interim award 9o 3, & ) &aragra&h ='2 in a&&licantHs affida+it 8ncl 2, 85h C->:,, & )A"' 3C' In interim award 9o 2, & 36 &aragra&h ( (see a&&licantHs affida+it 8ncl 2, 85h

C-> 33, & 300" the arbitrator states as followsB -enior counsel for the res&ondent (namely, the a&&licant in this OM" has adumbrated that there was some delay by the claimant (namely, the res&ondent in this OM" in starting wor$s after the recei&t of the structural drawings but the claimant ha+e e5&lained this and I ha+e dealt with this in my interim award'

31

3A'

In other words, the arbitrator is stating that he had dealt with the D&eriod of delay

between instructions K drawings and commencement of wor$sD in the following manner' #hat he has made a finding on or referred to the claimantHs De5&lanationD for the delay and that he had also dealt with or made some finding with res&ect to the D&eriod of delay between instructions K drawings L commencement of wor$sD in his interim award' 9o matter how one cannot find any e+idence, finding or reference in any interim award that of any De5&lanationD offered by the res&ondent for the D&eriod of delay between instructions K drawing and commencement of wor$sD and one also cannot find any e+idence or reference in any interim award where the arbitrator Ddealt withD or made any finding with res&ect to the D&eriod of delay between instructions K drawing L commencement of wor$sD ' 20' #herefore as submitted by the a&&licant where it is shown that the De5&lanationD,

Dthe dealing withD or Dthe findingD referred to by the arbitrator does not e5ists, then there is an Derror of law on the face of the awardD' #he arbitrator has referred to or relied on e+idence which does not e5ist' 23' In interim award 9o 2 & 3, &aragra&h 8 (see a&&licantHs affida+it 8ncl 2, 85h

C-> 33, &303", the arbitrator stated as followsB (or the abo+e reasons, I therefore set aside the 302 days 8O# granted by the architect for .loc$ A and substitute instead the 8O# to run ''' 22' In other words, the arbitrator confirms that he relied on the Dabo+e reasonsD when

deciding to set aside the 8O# granted by the architect and substituted with the arbitratorHs own 8O#' As one of his DreasonsD, the arbitrator relied on the res&ondentHs wor$ &rogramme as De+idence of +arious factsD' In interim award 9o 2, & 3, &aragra&h . (see a&&licantHs affida+it 8ncl 2, 85h C-> 33, & 303", the arbitrator states as followsB the im&ortance of com&leting the #9. substation early was clearly mar$ed in the wor$ &rogramme submitted by the claimant (namely the res&ondent in this OM" to the architect' According to the wor$ &rogramme construction should begin soon after the claimant had ta$en &ossession of the site'

32

2)'

#he res&ondentHs wor$ &rogramme relied on by the arbitrator, is 85h C3

Anne5ure -A and -. (in a&&licantHs affida+it 8ncl 2, 85h C->:32, & 33) and 337"' 9o matter how, one cannot find the #9. substation Dmar$ed or identifiedD anywhere on the res&ondentHs wor$ &rogramme' Although the res&ondentHs wor$ &rogramme has bars (namely Items )6 to 7=" re&resenting +arious Mechanical L 8ngineering (DML8D" acti+ities, the #9. substation is not s&ecifically indicated anywhere in the res&ondentHs wor$ &rogramme' #hus, it was therefore im&ossible for the arbitrator to rely on the res&ondentHs wor$ &rogramme as e+idence to show that the construction of the #9. substation was su&&osed to ha+e commenced Dsoon after the claimant had ta$en &ossession of the siteD' I am of the +iew that where the arbitrator relies on the res&ondentHs wor$ &rogramme as De+idence of certain factsD, but it is then shown that the res&ondentHs wor$ &rogramme does not contain any such DfactsD, then there is an Derror of law on the face of the awardD, and I so hold' 27' In interim award 9o 2, & 3, &aragra&h 8 (refer a&&licantHs affida+it 8ncl 2, 85h

C-> 33, & 303" the arbitrator stated as followsB In my o&inion, a fair and reasonable 8O# for .loc$ 2A would be from March 6, 3AA7 (original com&letion date" to (ebruary 26, 3AA= (the date of the commissioning of the ML8 ser+ices"' (or the abo+e reasons, I therefore set aside the 302 days 8O# granted by the architect for .loc$ A and substitute instead the 8O# to run from March 6, 3AA7 to (ebruary 26, 3AA=' 2=' In so doing, the arbitrator automatically e4uates the 8O# to be granted as being

e4ual to the e5tra time &eriod ta$en by the res&ondent to commission the ML8 ser+ices, namely )=, days (namely, March 6, 3AA7 to (ebruary 26, 3AA="' #his is incorrect' #he arbitrator must assess the delay caused by the Drelocation of the #9. substationD and not sim&ly e4uate the 8O# to the e5tra time &eriod ta$en by the res&ondent to commission the ML8 ser+ices, namely )=, days (namely, March 6, 3AA7 to (ebruary 26, 3AA="' It is essential to a&&reciate in 8O# com&utations that the &eriod of e5tension to be granted is the effect (actual or estimated" that the delaying e+ent had (or will ha+e" on the date for com&letion' e are not

33

concerned with the recording of immediate or direct conse4uence of the e+ent on the carrying out of the wor$, for its effect on the final outcome may be +ery different, not least because it is the contractorHs duty to mitigate the effect of a delaying e+ent as far as he reasonably can with his intended le+el of resources' 26' 2,' (-ee .oo$ DConstruction Eaw in -inga&ore L MalaysiaD 2nd 8dn, & )32"' ;ust because the res&ondent too$ an e5tra )=, days from the original com&letion

date to com&lete the #9. substation and commission the ML8 ser+ices, it does not automatically mean that the Drelocation of the #9. substationD caused )=, days delay to the res&ondent' #he methodology used by the arbitrator is wrong in law for the following reasonsB 3' It leads to an absurdity' #he arbitratorHs methodology means that if the

res&ondent had ha&&ened to ta$e 700 e5tra days to com&lete the rele+ant wor$s, then 8O# would summarily without any further 6ustification, also ha+e been e5tended to 700 days' #he arbitratorHs methodology runs contrary to the acce&ted &rinci&les of assessing 8O#? 2' (ails to consider the obligation on res&ondent as contractor, to mitigate

delays' #his method also negates the res&ondentHs contractual obligation to mitigate the effects of delay howsoe+er caused' Pursuant to Clause 2) (last &aragra&h" of the PAM (orm (see a&&licantHs affida+it 8ncl 2, 85h C->:2, & 36", the res&ondent is under a duty regardless of who or what causes a delay to mitigate the delay' )' #he Arbitrator failed to a&&ly &rinci&les countenanced by the law' (urther,

in assessing 8O#, the arbitrator is obliged to assess 8O# in the same manner and in com&liance with the same &rinci&les im&osed u&on the architect by the PAM (orm, architectural &ractice and the law' #he arbitrator cannot a&&ly his &ersonal methodology of assessing 8O# and ignore the &rinci&les countenanced by PAM (orm, architectural &ractice and the law' #he PAM (orm and architectural &ractice re4uires the arbitrator to ta$e into account inter alia the &rinci&le of Dconcurrent delaysD when assessing 8O#'

34

2'

In assessing 8O#, the assessor (architects and arbitrators ali$e" must ta$e into

account the issue of Dconcurrent delaysD' In DEaw and Practice of Construction Contract ClaimsD 2nd 8dn by Chow <o$ (ong, the writer saidB DConcurrent delaysD is an e5&ression which describes a situation where there are two or more causes or delay o&erating at a &articular &oint of time and at least one of these causes is outside the contractorHs control' Consider the situation where a contractor, as a conse4uence of his own shortcomings, fail to $ee& with the &rogress of the wor$s with the result that he could not begin an im&ortant acti+ity on the start date sti&ulated in the construction &rogramme' >owe+er, because the em&loyerHs engineers had delayed in su&&lying the necessary drawings and instructions for the same acti+ity at the scheduled date, the contractor would not ha+e been able to commence wor$ on the same acti+ity e+en if he had been ready' #he situation is com&licated because it is difficult, on the usual &rinci&les, to determine firstly the &recise chain of causation e5erted by these e+ents on the o+erall contract &rogramme and secondly the settlement of 4uestions relating to li4uidated damages and e5tensions of time' Abrahamson suggested that in such a situation, the im&ortant consideration is whether the contractor had been held u& by DdelayD outside his control' #he em&loyerHs act of &re+ention is thus inconse4uential if it does not constitute the critical cause of delay, i'e' the delay would still ha+e occurred e+en if there had been no act of &re+ention' #his a&&roach has the attraction of sim&licity and, &erha&s more im&ortantly, consistency in the final result' Abrahamson obser+edB F#hisG conclusion does ha+e the &erha&s unfair result that the em&loyer may be entitled to reco+er li4uidated damages from the contractor for the delayed com&letion e+en though the em&loyer was not in a &osition to allow the contractor to com&lete earlier, but any other &rinci&le could lead to much

35

confusion in substituting for an e5amination of whether the contractor actually was delayed by a cause beyond his control, a wide ranging e5amination into all e+ents that could ha+e caused delay had the contractorHs &rogress been different' )' #he &rinci&le of Dconcurrent delaysD re4uires the assessor of 8O# to consider the

actual &rogress of wor$s in situ at the rele+ant time when assessing the actual or estimated delay caused by the Drelocation of the #9. substationD' #his issue of Dconcurrent delayD is &articularly critical when the arbitratorHs own findings of facts show that when all the instructions and drawings were &ro+ided to the res&ondent (as contractor" by March C, 3AA7, the res&ondent was itself so delayed that the res&ondent could not commence the wor$s on the #9. -ubstation until about one month later' 7' In interim award 9o 2, & 37 &aragra&h % (see a&&licantHs affida+it 8ncl 2, 85h

C-> 33, & AC" the arbitrator stated as followsB 9e5t, it is the contention of senior counsel for the res&ondent (namely the a&&licant in this OM" that the claimant (namely the *es&ondent in this OM" were always running late and ne+er $e&t with any wor$s &rogramme' 9o authority has been cited by senior counsel to su&&ort this &ro&osition that this is a factor to be ta$en into account by the architect in assessing 8O#' On the contrary, in my o&inion, this seems to be an irrele+ant factor ha+ing regard to the authorities of Russe$ ' Viscount !ada "andeira (3C62" 3) C.' 37AK37) 8* =A and &odd ' C#urton(3CA," 3 !. =62' =' It is also obser+ed that when the a&&licant raised the issue of Dconcurrent delaysD,

the arbitrator held that the &rinci&le of Dconcurrent delaysD was an Dirrele+ant factorD and that Dno authority had been cited by senior counselD' It is noted that the a&&licant had as early as ;uly 3AA6 together with the a&&licantHs written submission dated ;uly 2,, 3AA6 submitted a bundle of authorities containing authorities on the &rinci&le of Dconcurrent delaysD to the arbitrator' $nter alia, the following authorities on concurrent delaysD were submitted to the arbitratorB

36

a'

Eaw and Practice of Construction Contract Claims by Chow <o$ (ong,

2nd 8dn && 36, and 36C? b' c' 2' Ra/mond Constructors o1 A1rica ' United !tates 3CC Ct Cl 37, 3A6A? Fis#.ac# 3 Moore Internationa$ Cor A-.CA 9o 3C376'

It must be noted that all submissions for interim award 9o 2 were made in writing

by the &arties' .ecause submissions were made in writing, the a&&licant ne+er $new until after the &ublication of interim award 9o 2, that the arbitrator had forgotten about the authorities cited by the a&&licant with res&ect to Dconcurrent delaysD' 8+en if authorities had not been cited (which is not the case", the arbitrator ought to ha+e at least informed the a&&licant that the arbitrator re4uired authorities' #he arbitrator ought not to re6ect the a&&licantHs submission in such a summary manner' )' It is submitted that the arbitrator misread and K or misa&&lied the case of Russe$ '

Viscount !ada "andeira (3C62" 3)C. 37A K 37) 8*=A and &odd ' C#urton F3CA,G 3 !. =62' #he abo+e authorities state that if the em&loyer causes a delay, and where there is no contractual &ro+ision that &ermits the granting of e5tension of time (8O#" for such delay, then the em&loyer is not entitled to claim li4uidated damages against the contractor' >owe+er, for issue 9o 2 and interim award 9o 2, it had already been ad6udicated that the Drelocation of the #9. substationD is a delay co+ered by Clause 2) of the PAM (orm and e5tension of time (8O#" can be granted' #he only issue is how much 8O# should be granted' #herefore these cases are not rele+ant and these cases do not &reclude the a&&lication of the &rinci&le of Dconcurrent delaysD when 8O# is to be assessed' In assessing 8O#, the assessor (architects and arbitrators ali$e" must also ta$e into account the issue of Do+erla&&ing wor$sD' 7' "a$1our "eatt/ "ui$din%s Ltd ' C#estermount 2ro erties Ltd 62 .E* 3 is a

contract case about li4uidated damages and e5tension of time:effect of +ariations re4uired during &eriod of Dcul&able delayD? whether e5tension of time should be DnetD or DgrossD, this is what Colman ; said at & )3B Against this bac$ground the contention that the DgrossD method is DfairD to both &arties cannot stand u&' If a contractor o+ershoots the &re+iously

37

fi5ed com&letion date he must &ay li4uidated damages for the whole of the &eriod of time from that date to &ractical com&letion unless the architect subse4uently e5tends the time for com&letion by reason of a rele+ant e+ent by retros&ecti+ely &ost&oning the com&letion date' lf the rele+ant e+ent is a +ariation instruction the architect will ha+e to consider whether it is fair and reasonable that the contractorHs total &eriod of time for com&letion should be increased' If the +ariation wor$s can reasonably be conducted simultaneously with the original wor$s without interfering with their &rogress and are unli$ely to &rolong &ractical com&letion, the architect might &ro&erly conclude that no e5tension of time was 6ustified' >e would therefore lea+e the com&letion date where it was' #hat would lea+e the contractor to &ay li4uidated damages for the amount of time by which he had e5ceeded the original &eriod of time for com&letion' >is continuing liability to &ay li4uidated damages while he is at the same time carrying out the +ariation wor$s does not reflect an assum&tion by him of the ris$ of loss of time due to what would otherwise be an act of &re+ention' It merely reflects his breach of contract by failing to com&lete the original wor$s within the original or last:fi5ed contract &eriod for com&letion' =' #hat this &rinci&le of Do+erla&&ing wor$sD as e5&ressed in "a$1our "eatt/ is

a&&licable to the PAM (orm 3A6A edition is confirmed by Construction Eaw in -inga&ore L Malaysia 2nd 8dn && )32:)3) which statedB It is essential to a&&reciate in 8O# com&utations that the &eriod of e5tension to be granted is the effect (actual or estimated" that the delaying e+ent had (or will ha+e" on the date for com&letion' e are not concerned with recording the immediate and direct conse4uence of the e+ent on the carrying out of the wor$, for its effect on the final outcome may be +ery different, not least because it is the contractorHs duty to mitigate the effect of a delaying e+ent as far as he reasonably can with his intended le+el of resources' %elay in one trade does not necessarily

38

affect the others, and delay in one section or &hase may be o+ercome by rescheduling or tem&orarily transferring &roduction resources to another' 6' #his &rinci&le, howe+er, is sub6ect to a &ro+iso that distinguishes HnetH from HgrossH

e5tensions of time during a &eriod of cul&able delay' As long as the wor$ on the site is continuing and &ractical com&letion (or its e4ui+alent" has yet to be attained, the contract administrator retains his &owers of instruction (including +ariation" and the wor$ remains sub6ect to other delay ris$s which could normally gi+e rise to a legitimate claim for e5tension' In the assessment of 8O# arising in such a situation, the contractor may argue that regard should be had to the date which then is reasonably &ossible of attainment following the delay (the HgrossH method", but this has the effect of wi&ing out the contractorHs liability for &re+ious delays and ignoring the true &ur&ose of 8O# which is to &ro+ide a basis for the com&utation of liability to E%' ,' #he HnetH method : assessment of the &eriod of delay caused by the e+ent and

adding this &eriod to the &re+iously established date for com&letion : could ha+e the anomalous result of fi5ing a date for com&letion of wor$ (inclusi+e of a late +ariation order" that falls before the date on which the +ariation order was issued? but ne+ertheless this method of assessment more truly reflects the total construction &eriod that should be allowed to the contractor and its end date from which E% should fairly be com&uted? see "a$1our "eatt/ "ui$din%s Ltd ' C#estermount 2ro erties Ltd 62 .E* 3' C' A reading of interim award 9o 2 will show that notwithstanding the issue of

Do+erla&&ing wor$sD was raised by the a&&licant, the arbitrator ne+er considered the issue of Do+erla&&ing wor$sD at all' #his is not une5&ected where the arbitrator had already discounted the &rinci&le of Dconcurrent delaysD' #he &rinci&le of Dconcurrent delaysD and Do+erla&&ing wor$sD are closely related in that both &rinci&les re4uire the arbitrator to consider the actual &rogress of wor$ in situ or on site, at the rele+ant time' And the arbitrator had already mista$enly decided that the actual &rogress wor$ on site at the rele+ant time is an Dirrele+ant factorD' I am of the +iew that it is an Derror of law on the face of the awardD when the following occursB

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a'

hen the arbitrator does not assess 8O# in accordance with the &rinci&les

im&osed by the PAM (orm, architectural &ractice and the law' 9amely the issues of Dconcurrent delays and o+erla&&ing wor$sD? b' hen the arbitrator does not ta$e into account the &rinci&le of Dconcurrent

delaysD in the mista$en belief that the rele+ant authorities ha+e not been submitted (when in truth such authorities had been submitted"? c' In the circumstances where &arties made written submissions, the

arbitrator erred in law and e4uity when he did not gi+e time or o&&ortunity to the res&ondent to assist and correct the arbitratorHs mista$en belief with res&ect to the &ur&orted DmissingD authorities on the &rinci&le of Dconcurrent delaysD? d' hen the arbitrator ta$es into account authorities that are not rele+ant to

the issue of assessment of e5tension of time' A' If the issue of Dconcurrent delaysD and K or Do+erla&&ing wor$sD are not

considered by the arbitrator, the arbitrator artificially and erroneously confines his assessment of 8O# to the narrow issue of whether the Drelocation of the #9. substationD delayed the commissioning of the ML8 ser+ices, without considering whether the res&ondentHs own acts and delays also delayed the com&letion of the ML8 ser+ices and K or the &ro6ect wor$s as a whole, and thus reduced the 8O# to be granted, and whether the res&ondentHs own acts and delays may ha+e reduced the im&act of the delay caused by the Drelocated #9. substationD, and thus reduced the 8O# to be granted' #his means that the assessment of 8O# by the arbitrator is contrary to the &rinci&les im&osed by the PAM (orm, architectural &ractice and the law' 30' In interim award 9o 2, & 36 &aragra&h ( and & 3, &aragra&h A (in a&&licantHs

affida+it 8ncl 2, 85h C-> 33, & 300 L 303" the arbitrator stated as followsB In dealing with the 8O# 4uestion, one of the factors which the architect must always bear in mind is whether the contractor can be regarded as contributing to the delay' In this case, I ha+e in my interim award held and ad6udged the claimant (as contractor" to be blameless' 9o e+idence has been adduced by the res&ondent to contradict this finding'

40

33'

#he arbitrator states that he has made a finding in the interim awards that the

res&ondent is DblamelessD and did not contribute to any delay and that Dno e+idenceD has been adduced to contradict such finding' #he arbitrator has at all times only made a finding that the res&ondent did not cause any delay during the following s&ecific &eriod, October 36, 3AA7 to October )3, 3AA7 and 9o+ember 3, 3AA7'

(-ee a&&licantHs affida+it 8ncl 2, 85h C->:,, & 6C at &aragra&h 3C'3(ii" L (i+""' 32' #he arbitrator has made no other finding of fact with res&ect to the res&ondentHs

contribution to delay' In other words, sa+e for the limited &eriods October 36, 3AA7 to October )3, 3AA7 and 9o+ember 3, 3AA7, the arbitrator did not ma$e any other finding as to whether the res&ondent delayed the &ro6ect wor$s during other &eriods' It must be noted that the &eriod of wor$s lasted from May 3AA2 to May 36, 3AA=? a total of some )6 months' May 3AA2 being the month when site &ossession was granted to the res&ondent (as contractor"' May 36, 3AA= being the date when the certificate of &ractical com&letion was issued to the res&ondent'
2.

I am of the +iew that the arbitrator is Dwrong in law on the face of the awardD, to

hold the res&ondent blameless of delay, when he had only considered a &eriod of less than one month out of a total &eriod of some )6 months' #he arbitrator is also mista$en when he stated that the a&&licant has adduced Dno e+idenceD to su&&ort the a&&licantHs contentions' >is own summary of the a&&licantHs submission in interim award 9o 2 & A &aragra&h A to 8 (see a&&licantHs affida+it 8ncl 2, 85h C-> 33, & A)" dearly shows that the a&&licant had referred the arbitrator to e+idence in the form of site minutes and the testimony of * ) to show the delay contributed by the res&ondent' .ut because the arbitrator had refused to consider the &rinci&le of Dconcurrent delayD, he summarily dismissed the e+idence'
3.

In 2attison 3 Co Ltd ' A$$ied ,ationa$ Cor oration Ltd F3A=)G 3 EloydHs =20

Pilcher ; of the !ueenHs .ench %i+ision heldB >eld, that the arbitrator had failed to identify the documents on which he had based his findings? further that the documents before the court did

41

not 6ustify the arbitrator in ma$ing such findings? and that the award would accordingly be set aside'
4.

In 2e%an% 2ros ectin% Co Ltd ' C#an 2#ooi Hoon% F3A=,G 2) ME; & 2)3

Mathew C; said at & 2))B In my +iew, 6ustice cannot be done in this case by remitting the award to the arbitrator' >e has consistently ta$en u& the attitude that he would only decide 4uestions which related to mining and on which as a mining engineer he was com&etent to e5&ress an o&inion, but anything relating to law he would not decide' #he fact that he may ha+e decided certain &oints of law without realising that he had done so aggra+ates the &osition' I can see no alternati+e but to allow this a&&eal with costs and order that the award be set aside' #he de&osit in court will be &aid out to the a&&ellants'
5.

In the instant case the arbitrator has not considered or a&&lied the re4uired and

rele+ant &rinci&les re4uired by the PAM (orm and K or architectural &ractice when assessing 8O#' #hus interim award 9o 2 is hereby set aside with cost'

Cases .alfour .eatty .uildings Etd + Chestermount Pro&erties Etd 62 .E* 3? .elsfield Court Construction Co' Etd + Pywell F3A,0G 3 All 8* 7)=? Chiam #au #Me + #he -arawa$ Eand Consolidation and *ehabilitation Authority F3AA)G ) CE; 60=? Io+ernment of <elantan + %uff %e+elo&ment Com&any Etd F3A2)G AC )A=? Pegang Pros&ecting Co Etd + Chan Phooi >oong F3A=,G 2) ME; 2)3? %odd + Churton F3CA,G 3 !. =62? Pattison L Co Etd + Allied 9ational Cor&oration Etd F3A=)G 3 EloydHs =20? *aymond Constructors of Africa + /nited -tates 3CC Ct Cl 37, 3A6A? *ussel + 1iscount -ada .andeira (3C62" 3)C. 37AK37) 8* =A Le%is$ations Arbitration Act 3A=2B s' 2), s' 27

42

Aut#ors and ot#er re1erences Chow <o$ (ong, Eaw and Practice of Construction Contract Claims, 2nd 8dn Construction Eaw in -inga&ore L Malaysia 2nd 8dn Re resentation >E Ioh (-< Oeoh L ;eganathan" for A&&ellant 9 -i+ananthan (Messrs -i+ananthan" for *es&ondent ,otes?= #his decision is also re&orted at F2000G 2 AM* 27

Conc$usion

*efer to the cases abo+e mentioned, the situation is related showing that the defendant as the 8m&loyer failed to ma$e an o+erdue &ayment of the +ariation (Clause 27'0 in the P' '%' (orm 20)A (*e+'200," and Clause 33'0 in the PAM 2006 (orm" wor$s e5ecuted by the &laintiff as the Contractor' #he situation showing that the 8m&loyer is in breach of contract' Annotated that when a contract has been bro$en, where the &arty suffers by the breach of contract is entitled to recei+e from the &arty who has out of order the contract, reimbursement for any loss or damage (Clause 3C'0 in the PAM 2006 (orm" caused to him and that such com&ensation is not to be gi+en for any remote and indirect loss or damage sustained by reason of the breach' hen an obligation resembling those created by contract has been incurred and has not been discharged, any &erson in6ured by the failure to discharge it is entitled to recei+e the same com&ensation from the &arty in default as if the &erson had contracted to discharge it and had bro$en his contract' #his case also can be related to the %etermination of Own 8m&loyment by Contractor (Clause 26'0 Q PAM 2006 (orm" where the 8m&loyer failed to ma$e any &ayment to the Contractor when he has e5ecuted the +ariation wor$s' It is interconnected with the

43

%etermination of Contractor2s 8m&loyment by #he 8m&loyer (Clause 2='0 Q PAM 2006 (orm" when breach of contract is made by the Contractor, meaning that the Contractor failed to &erform the +ariation wor$s instructed by the Architect' %ue to failure of Contractor2s obligation, Ei4uidated Ascertain %amages (EA%" (Clause 22'0 Q PAM 2006 (orm" will be im&osed' It is clear that a contractor wor$s for a &rofit, and a&art from his entitlement to the contract &rice, the damages to the contractor caused by any breach of contract by the em&loyer will need to be assessed, where any difference may need to be made between the em&loyer2s breach which ha+e the effect of bringing the wor$ to an end, or a+oid from starting, in both case which the contract may withdraw the contractor of &rofits on wor$ ne+er actually carried out and on the other hand, which sim&ly reduces his &rofits on com&leted wor$ Clause 27'2(+iii" of the PAM 2006 (orm refers to any act of &re+ention or breach of contract by the em&loyer and the same matter may also gi+e rise to an e5tension of time under clause 2)',(5i" '

1ariation furthermore related for the Eoss andKor 85&ense (Clause 27'0 Q PAM 2006 (orm" where fre4uently occur due to %irect Eoss L 85&ense in+ol+ed in +ariations or caused by allowable delays that is interru&tion of regular mo+ement of wor$ due to outstanding &ayment by the 8m&loyer' In any case, the contractor has to ma$e a written a&&lication within a reasonable time ha+ing incurred the loss andKor any &art of the wor$s ha+e been affected or delayed (re4uiring an 85tension of #ime Q Clause 2)'0 PAM 2006 (orm and Clause 7)'0 P' '%' 20)A (*e+'' 200," as a result of the instruction to carry out +ariation wor$s' #he broad &ur&ose of the loss andKor e5&ense clause &ro+ided in any contract is to reimburse the contractor for any loss andKor e5&ense, which he has suffered or incurred as a direct result of certain s&ecified e+ents in the contract' Contractors can also made a claim under this clause if regular &rogress of the wor$s or any &art thereof has been materially affected by one or more of the stated e+ents s&ecified in the clause' Contractors see$ing reco+ery for damages may include im&act costs such as loss of efficiency and e5tended general conditions due to +ariation wor$s' 8fficiency losses are the

44

result of wor$ disru&tions, rescheduling and stac$ing of trades, and &erforming wor$ in unantici&ated conditions' Ieneral condition costs claimed for the delay &eriod include e5tended o+erheads and administrati+e e5&enses, site su&er+ision, management, construction e4ui&ment, site office and site facilities, monthly o&erating costs and similar items' #o reco+er the costs of labor efficiency re4uires the contractor to establish the &rogress it e5&ected to achie+e with its use of &ro6ected resources, &ro+e the cost re4uired to achie+e the actual &rogress, and &ro+e that the increase in costs is related to a com&ensable delay issue' An effecti+e a&&roach to establishing the e5tent of efficiency losses is to show what &roducti+ity was realiMed on the &ro6ect during &eriods of no disru&tions or other im&act' #his is then com&ared with the &roducti+ity realiMed during the &eriod of dis&ute' #o reco+er the damages due to e5tended general conditions, the contractor must substantiate the cost by itemiMing the e5&enses e5&ended during each delay &eriod' If the &eriod cannot be isolated, it may be necessary to determine the costs for general conditions for the &ro6ect duration and use an a+erage daily rate' -imilarly, the contractor is also entitled to see$ reco+ery for its office o+erhead and administrati+e e5&enses' Eastly, matters related to any +ariations wor$ will then &roceed with the &re&aration of (inal Account based on the assessment done by the !uantity -ur+eyor by referring to all corres&ondence connected with the +ariation wor$s' #he &re&aration is normally based on all associated notices or instructions gi+en by the Architect in se4uence' And ensure all drawings and s&ecifications tally for all measurement or remeasurement meant for the +ariation wor$s' And, ensure all +ariation wor$s are assesses accordingly to the contract needs and re4uirement'

45

R-F-R-,C-! 3' 2' )' 7' Contract Practice for !uantity -ur+eyors, -econd 8dition (;' ' *amus" Construction Contracts, #hird 8dition (;ohn Murdoch L ill >ughes"

Agreement and Conditions Of PAM Contract 2006 ( ith !uantities" -tandard (orm Of Contract #o .e /sed Contract P' '%' (orm 20)A (*e+'200," here .ills Of !uantities (orm Part Of #he

='

;<* -tandard -&ecification for .uilding

or$s 200=

46