DISPUTE RESOLUTION IN RELATION TO DELAY OF CONSTRUCTION
PROJECT
TAN KIAN SOON
A project report submitted in partial fulfillment of the
requirement for the award of the degree of
Master of Sciences (Construction Management)
Faculty of Civil Engineering
Universiti Teknologi Malaysia
APRIL 2010
iii
To my beloved Wife, Chia Mei Lai,
Family and Colleagues.
Love is patient, love is kind.
It does not envy, it does not boast.
It is not proud, it is not rude.
It is not self-seeking.
It is not easily angered.
It keeps no record of wrongs.
Love does not delight in evil, but rejoices with the truth.
Love always protects, always trust, always hopes, always preserves.
Love bears all things, believes all things, hope all things, endures all things.
Love Never End.
Love Never Fails.
Thank you for your support, encouragement and everything.
iv
ACKNOWLEDGEMENTS
A research of this nature may not be undertaken without help and support of
others. First of all, I would like to express my great gratitude to my supervisor, Assoc.
Prof. Dr. Aminah Md Yusof for her tireless supervision, guidance and comment
throughout the whole process of writing this project report.
Extended thanks are also due to all of my devoted lecturers for the course of
Master of Science (Construction Management), without whom I would not have had
the knowledge to proceed of writing this project report.
Besides that, I am deeply grateful to my family especial my beloved wife
Chia Mei Lai for her unconditional patient, love and care throughout the years.
Deep sense of gratitude also dedicated to my colleagues, fore mostly the
directors of Makassar Ventures Sdn. Bhd. for their support in my further knowledge
enhancement.
Not forget two of the interviewee, Mr. Lim Eng Chong and Mr. Loh Chin
Youn for their kind assistance to facilitate their experienced input to the success of
my project report.
Last but not least, thank you to all who have made this project report possible.
v
ABSTRACT
Time has been a major constraint in the project undertaking in Malaysia.
Hence, proper works scheduling need to be planned. However, there are always
unexpected circumstances out of parties‟ control for the project processes slipping
over its planned schedule and end-up with disputes on delay issues. Usually, people
always look for more economical and time saving method for dispute settlement. But
there are still a portion of people choose to settle via litigation proceeding. This
problem brought to this study which aims to investigate the origin of disputes
settlement via litigation proceeding that contributed by delay in project undertaking.
The objectives of the study include the analysis of taxonomy of delay and review of
the available dispute resolution techniques. Analysis on the trend of delay dispute
resolution by litigation in the selected cases is made. Third objective was set where
the outline for dispute avoidance is formulated. This study is restricted to the cases
within Malaysia. Analysis shows that the main causes of the delay are the mostly
defaulted by the proprietor; the executors were showed as the majority party in filing
the court suit among which they obtained high percentage in winning the award. The
study shows that delay dispute settlement via litigation proceeding generally
occurred when the financial conflict between parties take place. In order to avoid the
settlement of dispute via litigation, measures of dispute avoidance are proposed. The
findings are expected to be useful as further references for parties in facilitate the
execution of their construction work.
vi
ABSTRAK
Masa sering menjadi kekangan utama dalam industry pembinaan di Malaysia
kini. Oleh itu, penjadualan masa yang ketat perlu dirancang. Namun, terdapat
keadaan terjadi di luar jangkaan pihak-pihak yang terlibat. Perkara luar jangkaan
boleh mengakibatkan kelewatan masa projek yang telah dirancangkan dan boleh
membawa kepada pertikaian antara pihak-pihak yang terlibat. Lazimnya,
penyelesaian yang lebih ekonomik dan menjimatkan masa akan ditimbangkan.
Namun, masih ada sebahagian pihak yang memilih untuk menyelesaikan isu-isu
pertikaian melalui proses perbicaraan di mahkamah. Apakah yang menyebabkan hal
ini berlaku? Kajian ini dibuat bertujuan untuk meninjau asal-usul penyelesaian
termasuk proses litigasi yang digunakan untuk menangani pertelingkahan dalam
kelewatan menjalankan projek. Kajian ini juga meliputi analisis taksonomi kelewatan
dan juga teknik-teknik penyelesaian yang terlibat dengan isu-isu pertelingkahan.
Analisis bagi kecenderungan penyelesaian pertikaian secara proses litigasi yang
disebabkan oleh kelewatan dalam kes-kes yang dipilih juga dibuat. Akhir sekali,
garis panduan untuk pengelakkan perselisihan juga dicadangkan. Kajian kes-kes
dipilih ini menunjukan bahawa punca-punca utama kelewatan yang membawa
kepada pertikaian antara pihak dan penyelesaian di mahkamah majoritinya
disebabkan oleh kesalahan yang disebabkan oleh pihak pemilik; kontraktor pula
merupakan pihak majoriti yang mengemukakan tuntutan mahkamah dan juga antara
pihak sering menang dalam kebanyakan perbicaraan kes-kes yang dipilih. Penemuan
kajian in telah menunjukkan bahawa penyelesaian diajukan melalui litigasi ekoran
penangguhan atau kelewatan bila terjadinya konflik kewangan di antara pihak-pihak
yang terlibat. Untuk mengelakkan penyelesaian menerusi cara perbicaraan litigasi,
tindakan pencegahan pertikaian dicadangkan. Mudah-mudahan, harap kajian ini
dapat dijadikan bahan rujukan kepada pihak dalam memudahkan perlaksaan kerja
kontrak pada masa akan datang.
vii
TABLE OF CONTENTS
CHAPTER
1
TITLE
PAGE
DECLARATION
ii
DEDICATION
iii
ACKNOWLEDGEMENT
iv
ABSTRACT
v
ABSTRAK
vi
TABLE OF CONTENTS
vii
LIST OF FIGURES
xi
LIST OF APPEDICES
xii
INTRODUCTION
1.1
Background Studies
1
1.2
Problems Statement
3
1.3
Aim of Project
5
1.4
Objectives of Project
6
1.5
Scope of Study
6
1.6
Brief Project Methodology
6
1.6.1 Initial Study and Identifying the
7
Research Issue
1.6.2 Literature Review
7
1.6.3 Data Collection
7
1.6.4 Research Analysis
7
1.6.5 Conclusion and Recommendation
8
viii
CHAPTER
TITLE
2
CONSTRUCTION CONTRACT
2.4
2.1
Introduction
9
2.2
History of Construction Contract Law
9
2.3
Standard Form of Contract
11
2.3.1 PWD 203A Standard Form of Contract
13
2.3.2 PAM Standard Form of Contract
14
2.3.3 Other Standard Form of Contract
14
Delay
2.5
2.6
3
PAGE
15
2.4.1 Studies on Causes and Effects of Delay
17
2.4.2 Type of delay
19
2.4.2.1 Compensable Delay
20
2.4.2.2 Excusable Delay
28
2.4.2.3 Concurrent delay
30
2.4.3 Contract with No Provision for Delay
31
Disputes
31
2.5.1 The origin of Construction Disputes
32
2.5.2 Disputes Resolution
33
2.5.2.1 Negotiated Settlement
34
2.5.2.2 Alternative Dispute Resolution
34
2.5.2.3 Mediation
35
2.5.2.4 Arbitration
35
2.5.2.5 Litigation
36
2.5.3 Disputes Avoidance
37
Summary
40
DATA COLLECTION
3.1
Introduction
41
3.2
Methodology of Study
41
ix
CHAPTER
4
TITLE
PAGE
ANALYSIS AND DISCUSSION
4.1
Introduction
47
4.2
Position in Selected Malaysia Cases
47
4.2.1 Causes of Delay Disputes
55
4.2.2 Review of the Causes for Delay
60
Dispute in Project Completion
4.2.2.1 Failure to Give Timely /
60
Adequate Order for Work
4.2.2.2 Failure to Coordinate Prime /
61
Nominated Contractors
4.2.2.3 Excessive Change order
61
4.2.2.4 Improper Site Preparation
62
4.2.2.5 Failure to Make Timely
63
Payment to Contractors
4.2.2.6 Defective Drawings or
64
Specification
4.2.2.7 Suspension / Stoppage
64
4.2.2.8 Bureaucratic Red Tape
64
4.3.2.9 Weather, Acts of God, and
65
Labor Problems
4.2.2.10 Non-excusable Delay – Within
65
Executor Control
4.2.3 Court Suit Filling
66
4.2.4 Court Judgment
67
4.3
Trend of the Dispute Resolution
69
4.4
Proposed Steps/Measures for Delay Disputes
70
Avoidance
4.5
4.4.1 Pre-Construction
71
4.4.2 During Construction
76
4.4.3 Upon Completion
82
Summary
82
x
CHAPTER
5
TITLE
PAGE
RECOMMENDATION AND CONCLUTION
5.1
Introduction
84
5.2
Summary of Findings
84
5.3
Conclusion
87
5.4
Recommendation
87
REFERENCES
88
APPEDICES
91
xi
LIST OF FIGURES
FIGURE NO.
TITLE
PAGE
3.1
Research Process and Methods of Approach
42
4.1
Summary of Delay Dispute Causes from
56
Selected Cases
4.2
Percentage of Parties‟ Contribution on
66
Court Suit Filing
4.3
Judgment Comparison between Plaintiff /
67
Appellant and Defendant / Respondent
4.4
Judgment Comparison between Executors
68
and Proprietors
4.5
The Trend of Dispute Resolution Arise due to
69
Delay in Project Completion
4.6
Hierarchy of Malaysia Court System
70
xii
LIST OF APPENDICES
LIST
TITLE
PAGE
A
Haji Hasnan vs. Tan Ah Kian ([1963] 1 MLJ 175)
92
B
Syarikat Soo Brothers Construction vs. Gazfin Sdn
97
Bhd ([1989] 1 MLJ 64)
C
Johor Bahru Pyramid Sdn Bhd vs. Sinometal
Punching Technology Sdn Bhd ([2009] MLJU 0049)
105
CHAPTER 1
INTRODUCTION
1.1
Background Studies
The construction industry in Malaysia plays an important role in the nation
economy growth. The industry acts as catalyst for the economy through the creation
of wealth to other industries such as education, financial, manufacture, services and
etc.. Although it contributes only 2.5% of the nation gross domestic product in 2007,
it has been eminence as inauguration path to many other sectors namely
manufacturing, education, financial, services and etc. Recent scenario shows that
production of the industry has been boost, following by the allocation from
Government to the expedition of 9th Malaysia Plan‟s projects in 2007; an average
growth of the industry on that particular year was 4.6% after experiencing three
consecutive years of declines (2004, -0.9%), (2005, -1.5%), (2006, -0.5%).1
Continual progression is expected for coming years.
In recent decades, construction projects have tended to become time
constrained.2 Ex-Minister of Work, Y.B. Dato‟ Seri Samy Vellu (2007) quoted: “The
construction industry of today is not alike the construction industry in the past. The
challenges faced by the industry in the demanding world of today are manifold and
the constraints are ever increasing. It is no longer sufficient to deliver what proprietor
wants cost-effectively as it used in the past. We, in the construction industry, must
deliver our product not only cost-efficiently but in shortest time possible, with high
quality attainable, as safely as deemed acceptable, without upsetting the ecological
balance in order to remain sustainable.”
2
Consequences to the above, industry players have given more emphasis to the
time related issues as early as during the contract binding stage. This was achieved
through the employment of Forms of Contract which form the bulk of many
engineering / construction contract let-out. The formation of the Form of Contract is
on the basis of the agreement between the parties; and the type of the Form of
Contract which commonly used in the industry are Standard Form of Contract,
modified Standard Form of Contract and as hoc or „bespoke‟ Forms of Contract.
Among the above, Standard Form of Contract are the most eminent in this industry.
Several provisions have been drafted into the contract condition of Form of Contract
which time interrelated requirements were drafted for the conduct of trade of the
industry.
Alike other country, Malaysia possesses quite a number of Standard Form of
Contract in engineering / construction sector; PWD 203A and PAM are among the
famous Form of Contracts which are widely used in the government and public
sector respectively in this industry. Other than that, some are practicing Standard
Form of Contract like IEM Form, CIDB Form, JCT Form, IEEE Form, FIDIC Form,
ICE Form, IMechE Form, modified PWD Form, and etc for the execution of contract
exercises. Whilst there are other Standard Form of Contract which involving
particular industries and some specific employers, namely oil and gas, power plant,
highways, TNB, PETRONAS and etc.
Under the Standard Form of Contract, time frame required were specified for
some particular conduct of trade which is agreed upon between parties and it were
practiced over the projects; it applied either from the initial project planning stage,
project execution stage and project utilization stage. Under clause 78, PWD 203A
Rev. 2007, it was written that “time whenever mentioned shall be of the essence of
this Agreement”, underlined the need to emphasize on „time‟. There are also
numbers of clauses under both PWD 203A form and PAM form where executors are
required to use their best endeavor to execute the project within the time frame and
avoid the delay a project.
3
As a developing country, Malaysia construction project have been increase in
size as well as complexities in its nature result from the mammoth requirement of
infrastructure and advancement in technologies. Prevailing Standard Form of
Contract became further ambiguities eventually make it become more complex and
causing adversarial impacts especially increase in number and frequency of disputes.
1.2
Problems Statement
“Time is essence” is the vital philosophy in construction industry nowadays.
The issue of time scheduling has hassle the industry since the beginning. It has been
acknowledged by many construction researchers and industry practitioners as one of
the most important performance criteria of a successful project. When time is
believed overrun beyond completion date specified in the contract or beyond the date
the parties agreed upon for the delivery of one project task, time delay issue arise.
The issue of time delay in the industry is not only commonly understood but
accepted to be the norm. It is not just restricted as global phenomena but also no
exception and is common in Malaysia‟s construction industry. The industry
practitioners, proprietors and executors alike are very sensitive to changes to the
agreed completion date and even time frame of its project; both want their projects
delivered on time. To the proprietor, time delay denoted loss of revenue as
consequential from lack of productivity. Many of proprietors would consider these
extra expected losses to be wasted. From executors‟ points of view, time delay means
occurring of extra overhead cost due to the longer working time as well as higher risk
to the fluctuating of material and labor cost. Hence, when time-related conflicts arise;
either party will try to overcome their losses by imposing claims to each other‟s.
„Time is revenue‟ is closer to the reality of construction industry; with shorter
time, profit margin can be increased.
With regard to the fact that construction
industry is also part of the business, earning more profit also mean the success of the
project. To complete the projects on time and within schedule is an essential
benchmark for both proprietors and executors. But there are always unexpected
4
circumstances out of both proprietor‟s and executor‟s control for the project
processes slipping over its planned schedule. These processes subjected to many
variables and unexpected factors, which caused by many sources such as
performance and involvement by parties, resources availability, contractual relation,
environmental condition.
Construction project often experience delays, it can happened in whatever
path along the course of contract process. The argument that arises when a
construction project has been delayed is whether the proprietor or executor can
recover damages from either party for the delay. Normally, when the projects are
delayed, they are either extended or accelerated and therefore, incur additional cost.
Even though, the normal practices usually allow a provision in the project cost as
contingency allowance in the contract price,3 but in reality, those provisions are
actually not sufficient when the time delay issue really took place.
High on the list causes of serious construction disputes is delay and time
extension. These disputes contribute to incessant increase in the number of cases
pending in various courts. Approach in resolving the disputes are usually defined by
the terms of the construction contract which outlines the obligations and duties of the
proprietors and executors of the project. It provides the provision of remedies if one
of the parties does not perform as promised. Such disputes can be very costly not
only due to the high cost directly related to the disputes settlement processes such as
arbitration or litigation, but can also be very costly related to the delays and possible
shut down of the project while disputes are being settled. 4
Efforts from varies parties like PWD, PAM, IEM, CIDB and even Federal
government on the establishing of rules and standards on works execution to
encounter the delay issue can be seen from the introduction of various Standard Form
of Contract and also with the existence of Contract Act 1950. There are clauses
provided in Standard Form of Contract such as PWD 203A form, PAM form, and etc.
as well as Contract Art 1950 in relation to time factor which attempted to evade the
occurrence of disputes.
5
With the increasing complexity in contracts, the situation is expected to
further worsen; numbers of disputes has been added to the existing un-settled cases
and caused further delay to the settlement of un-going disputes. Involved parties will
felt frustrated because of the delay in the dispute settlement which are actually time
consuming. Those delays in dispute settlement have manifold effects as below:
-
It contributes to the cost and time overruns;
-
It jeopardizes the project progress if the dispute arise during course of
construction; and
-
It is detrimental to the relationship between executors and proprietors.
In disputes settlement, the involved parties will most probably try to look for
more convenient method to overcome the above-mentioned effects. Many of disputes
resolution methods are available and it is depend on what extend the parties can
accept the method and how they need those disputes to be resolved. Among those
available, litigation proceeding are well known to be the most time and cost
consuming disputes resolution method. But there is still growing tendency to the
disputed parties to take the dispute the court. What are the factors that bring them
come to this extend?
1.3
Aim of Project
This aim of study is to investigate the origin of disputes settlement that
contributed by delay in project undertaking and how litigation deals with the issue in
selected cases. Through this study, the parties to the contracts in construction
industry may able to have better understanding on concept and their legal positions in
a delay disputes settlement especially through the process of litigation proceeding.
6
1.4
Objectives of Project
The above aim of research is supported with the following objectives:
i.
To study the taxonomy of delay and the available dispute resolution
techniques in construction projects;
ii.
To analyze the trend of delay dispute resolution by litigation in the selected
cases, and
iii.
1.5
To formulate an outline for better delay dispute avoidance.
Scope of Study
Scope of this study covers on the delay disputes related issue and cases in
Malaysia construction industry and it is attempted to link with Standard Form of
Contract. The reference of Standard Form of Contract will be concentrated on PWD
203A (83)/2007 and PAM 1998/2006 (with quantities) which are well known and
commonly used standard form of contract in Malaysia.
All cases attended to in this study are representing disputes that are resorting
to litigation rather than arbitration or other alternative dispute resolution; although
the use of mediation which is one of the alternative disputes resolution method to
resolve commercial disputes can be said to be the continuing international trend (Oon
Chee Kheng, 2006), however, this study is not going to debate on that area.
1.6
Brief Project Methodology
The methodologies of this study has been separated into few steps, namely
identifying the research issue, literature review, data collection, research analysis,
and conclusion and recommendation. This approach is to ensure that the collection
of the information and the data analyzing can be precisely implemented.
7
1.6.1 Initial Study and Identifying the Research Issue
The overview of concept for the study was obtained through initial intensive
reading of books, journals, articles and newspaper cutting which can easily be
attained from the National Library, The Institution of Engineers, Malaysia‟s Library
and UTM‟s Library. Related information concerning current scenario of construction
industry in Malaysia and the contract issues in the industry were referred. From the
research issue, the objectives of the study are identified.
1.6.2 Literature Review
Various documentation and literature review regarding to the time delay in
construction related issue are collected to achieve the research objectives. Books,
journals, research papers, reports, newspaper as well as sources from the internet are
referred. References were obtained from libraries in The Institution of Engineers,
Malaysia, Selangor Branch, and Nation Library, Kuala Lumpur.
1.6.3 Data Collection
Legal cases based on previous court cases, journals, papers, reports which are
related to the time delay disputes in construction industry are collected from Malayan
Law Journals via UTM library collection and electronic database. Primary data:
electronic database, secondary data: books, act, articles, seminar papers and etc.
1.6.4 Research Analysis
Once the data are collected, case study is conducted on the related legal cases.
All the fact of the cases are reviewed and clarified. The focus of the analysis is on
disputes associated with the time delay in construction which is referred to the court
8
and the consequences of time delay disputes towards the parties involved in the
contract. Further to this, discussion and comparison would be done. The most
frequent disputes associated with the time delay in construction which are referred to
the court author are compared and identified. The same also would be done for the
consequences of the time delay disputes toward the parties involved.
1.6.5 Conclusion and Recommendations
Conclusion and recommendations are made based on the findings during the
stage of analysis.
CHAPTER 2
CONSTRUCTION CONTRACT
2.1
Introduction
This chapter deals with the literature review on construction contract.
Discussion is focused on the chronology of the origin for construction contract law as
well as application of various type of standard form of contract. This is followed by
the deliberation to the types and causes of the delay in the project undertaking and
then the disputes settlement in regard to the above mentioned delay issue. This
chapter serves as an introduction and understanding to the matters related to delay
dispute in Malaysia construction industry as to achieve the objectives laid in chapter
1.
2.2
History of Construction Contract Law
The law application to contractual transaction in Malaysia is at present
governed by the Contract Act 1950 (Act 136) (Revised 1974). Prior to the extension
of the Contract Act to the various component states of Malaysia, there were two
systems of law regulating contracts which were applicable to Malaysia: the common
law of England applied to Penang, Malacca, Sabah, and Sarawak, while the Contract
(Malay States) Ordinance 1950 applied to the remaining nine states of Malaysia.
Contract Act was later extended to all states of Malaysia in 1974.
10
Before the coming of the British, Malay legal codes together with customary
and Islamic law governed contracts in Malaya. English law was then introduced into
Malaya on 1807 through the First Charter of Justice after acquired Penang in 1786.
Later in 1826, through the Second Charter of Justice by British, Provision of English
Law was applied to Malacca, together with Singapore. Sabah and Sarawak were
British Protectorates before their cession in 1946. The Law of Sarawak Ordinance
1928 received English law. The Civil law Ordinance 1938 provided for the reception
of English law in Sabah.
In 1872, the British enacted the Indian Contract Act, codifying the English
law principles relating to contract. By 1899, the British extended the Indian Contract
Act 1872, with minor modification, to Federated Malay States, comprising Pahang,
Perak, Selangor and Negeri Sembilan as the Contract Enactment 1899.
In 23rd May 1950, the enactment became the Contract (Malay States)
Ordinance when the Federal Legislative Council of Malaya formally passed it and
made it applicable also to the Un-federated Malay States of Johore, Kedah, Kelantan,
Perlis and Terengggau. The revised Contract (Malay States) Ordinance 1950 became
an Act in 1st July 1974 and extended to all the component states of Malaysia
including Penang, Malacca, Sabah, and Sarawak.
The Language of the Contract Act 1950 does not provided for the Act to
apply retrospectively.5 Therefore, the provisions of the Act do not apply to contracts
entered into before the coming into force of the Act. In the other words, application
of Contract Act 1950 taking place only after it enforcement.
The governance of contract in Malaysia is through the application of standard
form of contract. In construction industry, there are various forms available. The
matter is dealt in the following section.
11
2.3
Standard Form of Contract
Standard Forms of Contract have been extensively used in recent trend of
construction industry. Practitioners on Standard Forms of Contract has sparked the
debate about the traditional bargaining process which as an essential process in the
formation of a contract of the past. The elimination of the process denoted that
executors and proprietors may no longer meet to negotiate and bargain freely for the
terms and strike a deal6; executors become the weaker party in the contracting
process and legislation is seen to move toward the trend to protect weak party from
intimidate by proprietor with the application of Standard Forms of Contract.
However, it was the advantage to all involved party that the Standard Form of
Contracts have accumulated a body of case law and judicial pronouncements over
the years as to the interpretation of the various provisions and stipulations which
leads to certainty in their implementation7. Most of Standard Forms of Contract are
time tested and applicants are aware of their workability, limitation and drawbacks.
This familiarity could leads to administrative and cost efficiency and minimizes
possible claims and disputes.
Besides, Standard Forms of Contract provide the basic legal frame work
evidencing the legal relationship between the parties; identify the right, obligation
and duties. It might as well furnish a mechanism for regulating the conduct of the
commercial relationship between the parties and put in place the administrative
procedures necessary to affect the legal and commercial relationship between parties
for achieving the purpose of the contract. Hence Standard Forms of contract are
actually multifold governing not only legalities but also mundane administrative
issue to ensure that both parties are able to discharge and can actually discharge their
side of the bargain through full performance.
Lord Diplock (1974)8 has identified that there are two major kinds of
Standard Forms of Contract employed in the industry:
12
Type 1: Forms where „the standard clauses … have been settled over the
years by negotiation by representative of the commercial interest involved and have
been widely adopted because experience has shown that they facilitate the conduct of
trade. Contracts of these kinds affect not only the actual parties to them but also
others who may have a commercial interest in the transactions to which they relate,
as buyers or sellers … If fairness or reasonableness were relevant to their
enforceability, the fact that they are widely used by parties whose bargaining power
is fairly matched would raise a strong presumption that their terms are fair and
reasonable‟; and
Type 2: Form where „the terms … have not been the subject of negotiation
between the parties to it, or approved by other organization representing the interest
of the weaker party …. To be in a position to adopt this attitude towards a party
desirous of entering into a contract to obtain goods or services provides a classic
instance of superior bargaining power.‟
Meanwhile, according to Nayagam and Pathmavathy (2005), “Standard From
of construction contracts provide a basic legal frame work identifying the right,
obligations, and duties of the parties, establish the ambit of the powers and duties of
the contract administrator”.
When we pursuit through the histories, the initial version of Standard Forms
was drafted by various government agencies for works in the public sector. PWD
forms is the example where the earlier version of PWD Standard Form of Contract
modeled on the Royal Institute of British Architects, RIBA Form of Contract 19319
and made a revision on year 1983 and latest by year 2007 to keep up with the current
political and industrial development.
From the rapid progress of development projects, many other professional
bodies published their own version of standard form to suit the current development
and modernization and variation of procurement method; IEM form was first
published in 1989 and PAM form in 1969 (Lian, Im and Kheng, 2000)
13
As view in Contract Act 1950, there is always party delivering the standard
form of contract and try to insert certain clauses in the contract unfairly exempting
them from certain liabilities at common law. The Contract Act 1950 contains no
provision dealing with exempting clauses. The Malaysian courts have followed
English common law when considering this aspect of the law. The courts have tried
to protect the position of the recipient of form containing exempting clauses by:
-
Requiring certain standard of notice in respect of the onerous terms; and
-
Construing the form, whenever possible, in favor of the party receiving it.
2.3.1
PWD 203A Standard Form of Contract
PWD 203A Standard Form of Contract is the most commonly used contract
form for the government project. There are several types which have been widely
used for both engineering and building work undertaken on the basis of traditional
general contracting. These are:
-
PWD Form 203A (83)/2007: Condition of Contract to be used where bills of
quantities form part of the contract;
-
PWD Form 203 (83)/2007: Condition of Contract to be used for contract
based on drawings and specifications;
-
PWD Form 203N (83)/2007: form of contract to be used for nominated subcontractor where the main contract is based upon PWD Form 203 and PWD
Form 203A;
-
PWD Form 203P (83)/2007: form of contract to be used for nominated
suppliers where the main contract is based upon PWD Form 203 and PWD
Form 203A
-
PWD Form DB/T (2000 Edn): Condition of Contract for works being let out
on the „Turnkey/Design and Build‟ method of contract procurement.
Other than types as above described, there are no standard form established
by PWD for others contracts‟ procurement like management contracts, domestic subcontracts, serial contracts and continuation contract.
14
2.3.2
PAM Standard Form of Contract
Rather than developing and drafting a new standard form on its own, PAM in
collaboration with the Institute of Surveyors Malaysia, ISM in 1969 adopted 1963
Joint Contracts Tribunal, JCT Standard Form of Building Contractor (Reprinted 1968)
with modifications to be used for private sector building works through traditional
general contracting contract procurement method comprised:
-
PAM (with quantities) (98)/2006: Standard Form of Building Contract With
Quantities;
-
PAM (without quantities) (98)/2006: Standard Form of Building Contract
Without Quantities;
-
PAM NSC (98)/2006: Standard Form of Contract for Nominated Subcontractors to be used with PAM (98)/2006.
Similar to PWD form, PAM form as well not establish any standard for other
type of contracts‟ procurement which also included Turnkey types of contracts and
engineering type of contract.
2.3.3
Other Standard Form of Contract
CIDB Standard Form of Contract is the other type of government form of
contract which drafted and published by Construction Industry Development Board.
It is for building works undertaken under the traditional general contracting with the
„CIDB Standard Form of Contract For Building Works (2000 Edition)‟ being the
first such form and will soon be joined by the Standard Form of Contract for
Nominated Sub-contractors.
The Institute of Engineers, Malaysia (IEM) have stepped in to rectify the
seemingly confusing situation created by those widely used common standard form
and addressed the lacuna in this area of the industry by drafting and publishing a
15
series of Standard Forms for engineering works procured by way of traditional
general contracting.
Three main forms have been published by IEM which include the following:
-
IEM.CE 1/89: IEM Conditions of Contract for Work mainly of Civil
Engineering Construction (Reprinted on September 1994);
-
IEM.CES 1/90: IEM Standard Conditions of Sub-contract for use in
conjunction with the IEM Conditions of Contract for Civil Engineering
Works (Reprinted on September 1994);
-
IEM.ME 1/94: IEM Conditions of Contract for Mechanical and Electrical
works.
Other than above mentioned so-called „local‟ Standard Form of Contract, the
employment of foreign origin Standard Form of Contract can be seen from various
projects nowadays. The reasons for such usage are mainly because of the
involvement of international parties either in term of funding or participating. The
typical types of international Standard Form of Contract are listed below:
-
FIDIC Standard Forms of Contract;
-
JCT Standard Forms of Contract;
-
ICE Standard Form of Contract; and
-
IMechE and IEE Standard Forms of Contract.
The standard form of contract deals with matters that need serious attention
as these may lead to disputes. Amongst these is delay. The subsequent discussion
will look into delay.
2.4
Delay
Delay in construction industry contracting can be both psychologically and
financially destructive, just as they are in everyday life. Whether the delay results
16
from an act of God, breach of contract by one of the party, or differing site
conditions, its impact on construction contracts is often catastrophic. The old adage,
“time is money”, is definitely true in these situations.
“Time is of the essence” has become a common statement contained in the
construction prime contract and subcontracts. Its appearance mean that contract
performance be started promptly and continue without interruption until completion
within specified time period. It was also shown in PWD 203A 2007 Standard Form
of Contract clause 78. The words mean that the contractor or subcontractor has an
absolute duty to perform all contract requirements with no delay whatsoever and is in
material breach of contract for failing to complete the contract work within the
contractually specified time. Same to the proprietor that, these words also suggest
that if proprietor does not promptly review and approve shop drawings or promptly
perform other contractually specified duties has materially breach the contract.
Nevertheless, the common judicial view is not quite stringent. Court usually
applies the time-is-of-the-essence concept only to delays in performance that are
unreasonable. In this view, construction contracts, by their very nature, are so fraught
with the possibility of delay that delay is almost inevitable.
The clauses are
sometime interpreted to mean that the executor is required to achieve the time
deadlines, but not for proprietor. Nevertheless, constructors, subcontractors and
proprietors would be well advised to act as though time-is-of-the-essence
requirement will be strictly enforced with respect to their commitments to others.
As far as the claim is concerned, issue that we should assess in the first place
is the date on which work supposed to be completed. Executor usually specify the
performance period either by setting forth commencement and completion dates or
by starting that work should be completed within some number of days after notice
to proceed or commencement of the project. Many contracts also include interim
milestone dates, which specify the dates on which certain stages of the project are to
be completed. An inability to meet interim dates may provide the basic for actual or
liquidated delay damages, termination of the contract, or an acceleration directive.
All parties should take great care to clear define these time period, and the
17
consequences for the failure to meet any dates, to avoid misunderstanding and
disputes.
Where a contract contains a specific date for the commencement of work, the
proprietor may be deemed to have warranted that the project site would be in
sufficient state of readiness so the executor could begin the project on that day. If the
executor is not allowed to commence work on that date, the proprietor may be liable
for the delay damages. Proprietors often include a statement in the contract that the
specified commencement date is not only a projection or estimate in an attempt to
avoid liability for any delay.
2.4.1
Studies on Causes and Effects of Delay
From construction industry perspective, delays are mainly occurred due to the
issue of mismanaged the project. Success projects always been defined as meeting
goals and objectives as prescribed in the project plan. It means that the project has
accomplished its technical performance, maintained its schedule, and remained
within budgetary cost.
Many studies and articles conducted on causes of delay in construction
project, both locally and internationally have been reviewed. Chan and
Kumaraswamy10 conducted a survey to determine and evaluate the relative important
of the significant factors causing delays in Hong Kong construction projects. They
analyzed and ranked main reasons for delays and classified them into two groups: the
role of the parties in the local construction industry, whether are proprietor,
consultants or contractors, and the type of project. They ended up with result that
five major causes of delays were: poor site management and supervision, unforeseen
group conditions, low speed of decision making involving all project teams,
proprietor initiated variation and necessary variation of works.
Ogunlana and Promkuntong11 conducted a study on construction delays in
Thailand. They found that the causes of delay in construction industry of Thailand
18
could be shortage or inadequacies in industry infrastructure, main supply of
resources, caused by proprietors and consultants, and causes by executor‟s
incompetence/inadequacies. They recommended that there should be concerted effort
by economy managers and construction industry associations to provide the
necessary infrastructure for efficient project management.
Al-Ghafly12 has discussed the delay in Saudi Arabia‟s projects. Sixty causes
were identified and classified. He found that the delay occurred frequently in
medium and large size projects, and considered severe in small projects. Causes of
delay have been emphasized on the proprietor involvement, executor performance,
and the early planning and design of the project. Important causes are financial
problems, changes in the design and scope, delay in making decisions and approvals
by proprietor, and coordination and communication problems.
Kaming et al.13 studied influencing factors on 31 high-rise projects in
Indonesia and found out that project cost overruns occur more frequently and are
more severe problem than time overruns. In the time overrun prospect, the most
important factors causing delays are design changes, poor labor productivity,
inadequate planning, and resource shortages.
Noulmanee et al.14 investigated causes of delays in highway construction in
Thailand and concluded that delays can be caused by all parties involved in projects.
However, main causes come from inadequacy of sub-constructors, organization that
lacks of sufficient resources, incomplete and unclear drawings and deficiencies
between consultants and executors. They suggested that delay can be minimized by
discussions that lead to understanding.
Ibnu Abbas Majib15 in his studies on causes and effects of delay in Aceh
construction industry has identified fifty seven factors that causes delays and among
the most important causes are: insufficient numbers of equipment; inaccurate time
estimate; monthly payment difficulties; changes orders; inaccurate cost estimate;
poor site management and supervision; inadequate modern equipment; shortage of
the construction material; incompetent project team; improper planning and
scheduling; and executor‟s financial difficulties. Effects from the delay have been
19
group as six factors which include: time overruns cost overrun, disputes, arbitration,
total abandonment; and litigation. Time overrun and cost overrun were the two most
common effects of delays in construction project.
Locally, Murali Sambasivan and Yau Wen Soon16 have conduct studies in
Malaysia construction industry‟s delay by addressing its causes and effects. They
have identified 10 most important causes of delay from a list of 28 different causes
and 6 different effects of delay. Those important causes are executor‟s poor
management, inadequate executor experience, executor improper planning,
inadequate proprietors‟ financial and payments for completed work, problems with
subcontractors, shortage in material, labor supply, equipment availability and failure,
lack of communication between parties, and mistakes during the construction stage.
While the six main effects of delay were: time overrun, cost overrun, disputes,
arbitration, litigation, and total abandonment.
2.4.2
Type of Delay
Numerous types of delay causes can be categorized depending on the stages
of project execution when the delay took place and its consequences such as impose
of various type of damages claim. This defines the criticality of the delay in the
overall project completion and its impact thereafter. The delays are accordingly
classified as „critical delays‟ and „non-critical delays‟. Contract defines obligations of
parties to meet the project performance including schedule and also the recourse in
the event of failing to meet such obligations.
The recourse is generally asking for compensation for the delay by the
affected party from the other party and thus it is the choice of the affected party. In
certain cases, the affected party may be excused (i.e., he may not levy compensation
for the delay) while in some other cases not. The consideration to excuse or not to
excuse would depend on several factors such as whether a party can or cannot
foresee the situation causing delay at the time of entering the contract; and the impact
of delay on project performance. This leads to classify delays as „excusable‟ or „non-
20
excusable‟. However on certain situations when both parties are equally or partially
responsible for the delay, the delay is called as „concurrent‟ and analysis of actual
damage due to delay with respect to levels of obligations stated in the contract and
that actually performed helps in apportioning the quantum of losses to be shared by
parties.
Once the time has lost, a threshold question is whether the delay is
compensable or excusable; that is whether the executor will be paid, or made whole,
for the extra costs incurred as a result of the delay or whether only an extension of
contract time will be granted.
2.4.2.1
Compensable Delays
A compensable delay entitles the executor to both a time extension and to
compensation for the extra costs caused by the delay. Unless the contract contains an
enforceable no-damages-for-delay clause, a proprietor-caused delay is compensable
delay. It is possible that some delays that would normally be excusable only may
become compensable if they flow from the earlier compensable delay.
An example is a case where a proprietor-caused delay caused follow-on work
to be performed at time in the year when weather-related delay occurred, when that
work would have been completed prior to the inclement weather had the proprietorcaused delay not occurred. In this case, the extra costs insulting from performing in
the inclement weather, although normally not compensable, become compensable.
Other examples are changes in the work, access to the site, and site conditions differ
materially from those specified in the contract. Most of Standard Form of Contract
have provide provisions on this compensable delay claim under claim for loss and
expense as stated in PWD form 203A Rev.2007, clause 44 and PAM form Rev.2006,
clause 24.
Specific court cases have established some delays as “compensable”; these
are:
-
Delay caused by the owner improper inspection procedures [Gannon
Company v. United states, 189 Ct. Cl. 328 (1969)]
21
-
Delay in the approval of shop drawings submitted by the contractor
[Specialty Assembling and Packing Co. v. United States, 274 Ct. Cl.153
(1966)]
-
Inadequate or defective drawings or specification [United States v. Spearin,
248 U.S. 132 (1918) and J.D. Hedin Construction Co. v. United States, 171
Ct. Cl. 70 (1965)]
-
Contract changes when the nature of the work changed affects the original or
unchanged work and causes an extension of time [Conduit and Foundation
Corp. v. State of New York, 425 N.Y.S. 2d 874 (App Div. 1980)]
-
Owner workforce interference [Bateson Construction Co. v. United States,
319 F. 2d 135(Ct. Cl. 1963)]
The causes of the delay in project undertaking can be classified as below:
a) Delay due to Defective Drawings or Specifications
Construction drawings form an important constituent in the contract
document. There are different types of contracts practiced in construction projects
undertaking and drawings preparation can be responsibility of proprietors or even
executors depend on the contract requirement. Both proprietors and executors may
be involved in drawings preparation or checking procedures. Generally they lead to
three situations: delay from executor‟s side in preparation; delay from proprietor‟s
side in checking; and delay from both the parties.
If the issues arise from the first two of above-mentioned situations, the
responsibility of delay can be easily ascertained; either it is caused by delay from
proprietors or delay from executors. However, issues will become complex when
either parties reluctant to acknowledge that delay might be caused by any of them or
even from both of proprietor and executor.
In the situation where proprietor is responsible to the supply of drawings and
delay occurred during the process, the notice requirement comes into picture.
Proprietor is generally held to impliedly warrant the plans and specification he
provides to the executor.17 If such plans are erroneous or are insufficient to allow the
22
executor to perform the contract work in accordance therewith, or even when
executor failed to obtain any notice from the proprietor about the delay in receipt of
drawings, the executor forfeits their rights of getting compensation of any losses
caused by the delay and proprietor may be liable for time extension and delay
damages.
In another situation, where the duty to prepare and supply of drawings is the
responsibility of the proprietor, there are discrepancies observed between the sets of
drawings and the specification, or some details missing in the drawings or a number
of revised details need to be incorporated in the drawings, which may account for the
delay. Time consumption in the process of decision making and correction on the
discrepancy may lead to loss of time in execution of actual work.
These delay issues are covered under clauses 1.4, 3.4, 24.3(a) in PAM form
(2006) Standard Form of Contract and clauses 5, 8.2, 43.1 (e) in PWD form 203A
(2007). Under Standard Form of Contracts, executors are still responsible under their
obligation, to give written notice for any discrepancy found hence to safeguard them
from liquidated damages charges from proprietor if delay occurred.
Generally these discrepancies lead to varied interpretations by parties with
financial implications besides seeking for extension of time and thus become sources
of disputes. From the intrinsic nature of construction industry where standardization
has not yet been adopted throughout, there occur differences in interpretation of
discrepancies in the drawings. The question then arise is whether the delay is
substantial to affect the overall project schedule or not.18 The types of claims arising
out of such delays are generally on the grounds of idling of labor and equipment and
overhead charges. Even though the responsibility of the delay solves the question of
permission of extension of time, the compensations are awarded on the basis of facts.
b) Delay due to Improper Site Preparation
Another common cause of delay is site availability at the time the notice to
proceed is issued. Unless the contract provides otherwise, the executor is entitled to
the full use of the site at the time of notice to proceed. If the site is not available at
23
the time, the progress of the project may be delayed. Also, proprietor‟s failure to
provide a reasonable means of access to the work or interruption of access previously
provided a reasonable mean of access to the work or interruption of access
previously provided may delay the progress of executor.
Site possession always becomes an issue for construction contract. It can be
derived in two ways, which site or project handing over during completion of project
by executors or handing over of site from proprietor to executor for the execution of
work at initial stage of project.
According to condition of contract, site can be handed completely at the end
of project or by sectional during course of project progress. Briefly, there are clauses
under PWD form 203A (2007) and PAM form (2006) Standard Form of Contract
concerning about these issue, given under clause 39 for fully completion of work and
clause 41 for sectional completion for PWD form 203A (2007) whereas for PAM
form (2006) Standard Form of Contract, it was given under clause 21.
In cases of most infrastructure project contract, handing over sectional of site
during the project commencement is a common feature. Disputes under the issue of
delay in handing over site arose mainly in the argument whether the handing over is
due to overall of site or just partially. Executor in these cases will try to claim for
compensation for the idling of their resources and given advance alert to proprietor
as to safeguard themselves from liquidated damages.
As mentioned above, disputes might be arisen during the initial stage of the
project when there is delay in handing over site from proprietor to executor for the
commencement of project either fully or partially. Clause 38, 43.1(g) and clause 21,
24.3(b) under PWD form 203A (2007 and PAM form (2006) Standard Form of
Contract respectively briefly stated the condition on the issue of site possession.
The proprietor is generally required to provide the executor access to the
work site in a timely and properly sequenced fashion. However, in order to limit their
exposure, the proprietor may insert an exculpatory clause into the construction
24
contract or request that the executor waive their right or expressly assume the risk of
restricted access.19
When delay occurred due to non-handing over of site, either completely or
partially, the executors are eligible to claim for the idling of their resources provided
that written notice have been given in time and verified by the proprietor
representative. Alternatively, executors should show proves in writing that their
resources have mobilized to the site and idled due to delay of handing over from
proprietor. Contractually, it is proprietor‟s right to charge contract liquidated
damages if they prove that handing over site was done in proper manner and the
executors failed to start the work without acceptable reason.
Same case if the site is handed partially to executors, it is executor‟s
obligation to assess that whether possession of site in sectional will eventually
impede the progress of the project. Executors should demonstrate that the delay of
handing over particular part of site from proprietor actually fallen into the critical
path of the project progress then the delay should be attributable to proprietor.
Otherwise, any claim by executor ceases to exist.
c) Delay due to failure to supply material or labor
Many construction contracts make the proprietor responsible for supplying
materials and equipment to the executor. Should the proprietor breach this duty or
fail to provide the material or equipment in a timely manner, the proprietor will
generally be liable for delay damages. The proprietor may be able to shift the
responsibility for such delay however, by including an exculpatory clause in the
contract specifically to address this situation.
Under PAM form (2006), this provision was given in the clause 24.3(e)
written as: „delay or failure in the supply of material and goods which the employer
had agreed to supply for the work”.
d) Delay due to Failure to Coordinate Prime Contractors
25
When proprietor elects to contract with multiple prime contractors to
construct a project, many jurisdictions recognize a duty on the part of the proprietor
to coordinate the work of the separate prime contractors. Thus the proprietor may be
responsible to one prime contractor for delay caused by another. Even where the
proprietor attempts to shift this duty to one of the prime contractors, the proprietor
still may liable for delay if that executor is not also given the power to enforce the
responsibilities.20
e) Delay due to Failure to Make Timely Payments to Contractors
Should the proprietor fail to make timely payment, the executor may elect to
terminate the contract as specified therein, or continue with the contract work and
seek damages. The executor can generally recover interest on the late payments, and
in some jurisdictions may also be able to recover the consequential damages suffered
due to late payment.
In this case, PAM form (2006) Standard Form of Contract has given more
emphasize to this issue. Under clause 30, Certificates and Payment, clearly stated
that there is provision for executor to claim their losses for the late or non-payment.
These are further support by clause 24.3(m) where executor is eligible to claim for
the losses due to delay and non-payment issue.
f) Delay due to Failure to Inspect
Under the typical contract, proprietor may have the right or duty to inspect
the executor‟s work as it progresses. The proprietor may be liable to the executor for
inspections that are unreasonably intensive or repetitious, and for a failure to inspect
timely and promptly.21
g) Delay due to Failure to Give Timely Orders for Work
If the proprietor fails to issue the notice to proceed within the time frame
agreed in the contract (or within a reasonable time if the contract does not specify a
time), the proprietor will generally be liable for delay. This rule also applies to delays
26
on authorization for extra work, delay in responding to the request for information
and any unreasonable failure to approve materials.
Orders or instructions are normally given by „Superintending Officer‟ or S.O.
in the project site. Timely issuances of instructions are the most vital procedure to
avoid delay in any conduct of thread. As written in PAM form (2006) clause 24.3(a),
under the sub-clause of clause 24.0, Loss And/Or Expense Caused By Matters
Affecting The Regular Progress Of The Work, executor should be granted the claim
of losses in the event “the executor not having received in due time the necessary AI
(in this case, instruction from Architect) for which he had specifically applied in
writing to the Architect.” This also provided in PWD form 203A (2007) under clause
43.2(f) which stated the conditions similar to the above.
h) Delay due to Suspension
A suspension is a form of delay resulting from the proprietor‟s interruption of
the course of the work for a period of time. The term is primarily encountered in
general government contracts, where the standard „suspension of work‟ clause
provides, in clause 50, PWD form 203A (2007). Under its sub-clause 50.2, the
executors are entitled to claim for the extension of time if he suffers delay or incurs
expenses in complying written instruction by S.O. for the work suspension. Same
provisions were given in PAM form (2006), under clause 24.3(m) and 24.3(n).
The presence of this type of clause benefits both the executor and the
proprietor. It provides the proprietor the right to halt construction temporarily, if, for
example, the proprietor experiences funding or right-of-way- problems. In addition,
it provides that the executor will be fairly compensated for the resulting additional
costs and extended performance time.
i) Delay due to Excessive Change Orders
When the proprietor orders an excessive or unreasonable amount of changed
or extra work, the executor may be allowed to recover its resulting delay damages.
These damages are commonly referred to as “impact costs”.
27
Construction industry always facing problems that many scope of work can
only be decided during the course of project no matter how well the pre-planning
work done at the initial stage of project. The so-call „change orders‟ are inevitable for
the successful of the project. Variation and change order issues are identified as a
major source of disputes in most of the construction project cases. These may be due
to change of the design details, additional requirement by authority, and even due to
discrepancies found from contract documents.
To avoid the delay disputes related to variation and change order, experience
plays a key role in forecasting the probable areas of extra work and incorporating the
relevant clauses in conditions of contract. In the case of variation, it should be
express indicated by the executor that he is not doing the work as a complimentary
service, but expects the compensation for that before accepting any variation work.
j) Delay due to Acceleration
“Acceleration” is a term describing the situation when proprietor requires
executor to complete a project or partial part of project by a date earlier than the
contract completion date, as that date should be extended for excusable delays.
“Directed acceleration” occur when a proprietor consciously direct an executor to
complete earlier than the contract completion date. “Constructive accelerations” is
the term utilized in the more frequently encounter situation when an proprietor fails
to grant an executor time extension to which it is entitled, and the executor is
required to achieve, or strive for, an earlier completion than the properly extended
contract completion date. Thus acceleration may be a by-product of delay or other
factors that justify a time extension that is not formally granted by the proprietor.
The essential elements of a claim for constructive acceleration may be as
follow:
1) Excusable delay;
2) Timely request for a time extension;
3) Failure or refuse to grant request;
28
4) Conduct by proprietor that is reasonably construed as requiring the executor
to complete on a schedule that has not been properly extended;
5) Effort by the executor to accelerate performance; and
6) Additional costs incurred by the executor as a result of the acceleration.
If these elements are proven, the executor is entitled to recover the costs
incurred in accelerating its performance.
Acceleration damages usually take the form of premium time pay, the costs
of additional tools and equipment required for the additional crew, and the costs of
labor inefficiency that may occur due to longer hours or increased crew sizes, which
complicate work procedures.
All of above discussed is in regard to the compensable type of delay‟s causes.
Discussion will be continued to the following session with further review in the noncompensable type of delay‟s causes.
2.4.2.2
Excusable Delays
An excusable delay is a non-compensable loss of time for which the executor
will receive an extension of time but no additional payment. Excusable delays are no
default of either party to the contract. Although given an extension of time, the
executor must bear the cost associated with the delay. By absorbing time-related
costs, the proprietor is also bearing the consequences of the delay. Thus, each party
bears its own share of the costs of an excusable delay. Common examples of
excusable delay include strikes and inclement weather over and above the normal
experienced at the project‟s location locale. This type of delay is normally described
under clause of Standard Form of Contract for the provision of extension of time.
a) Delay due to Weather
Under most contracts, unusually severe adverse weather can give rise to an
excusable (but no compensable) delay. Unusually severe adverse weather is adverse
weather that is unusual for the time of year and the place it occurred. This may be
29
shown by comparing previous years‟ weather with the weather experienced by the
executor. The mere fact that the weather is harsh or destructive is not sufficient if the
executor reasonably should have anticipated that type of weather at the time and
place it occurred. Some bad weather is always to be expected. If the contract period
is 600 days, the executor obviously does not have a right to expect 600 dry, sunny
days with all of his subcontractors working at full force.
This type of delay is guarded in PWD form 203A (2007) clause 23.8(b) and
PAM form (2006) clause 43.1(b).
b) Delay due to Acts of God
Under most contracts, delays caused by acts of god – floods, hurricanes,
tornadoes, or earthquakes – fall into the excusable delay category, entitling the
executor to an extension of performance time. Provision in PWD form 203A (2007)
clause 23.8(a) and PAM form (2006) stated it as „Force Majeure‟. Thus usually
neither party is obligated to the other for additional costs resulting solely from acts of
god.
c) Delay due to Labor Problems
Similarly, delays resulting from most, but not all, strikes and labor
disturbances generally constitute excusable delay. If the strike is effect or anticipated
at the time of contracting, it may be determined, that because the labor problems
were foreseeable, the executor should have make a provision for them in the contract.
Likewise, when a strike is provoked by an unfair labor practice on the part of the
executor, the delay might not be considered to be due to a “cause beyond the
executor‟s control.”
With some exceptions, delay resulting from labor shortage not caused by
labor disputes will not be excused. Similarly, a time extension generally will not be
granted when its necessity results from subcontractor or supplier delays, because
responsibility for their actions is generally assumed by and attributed to the executor.
30
2.4.2.3
Concurrent Delays
Concurrent delays are delays that occur, at least to some degree, during the
same period of time. The term is used in construction as a term of art that refers to
the situation when a compensable delay and non-excusable delay occur at the same
time during overlapping time periods. For example, the term would apply when a
executor cannot complete work on the second phase of a project because the
proprietor has failed to obtain a necessary right-of-way, and, simultaneously the
executor is also prevented from commencing the second phase by their own failure to
timely complete precedent work in the first phase.
The phenomenon of “concurrent delay” creates interesting legal issues with
regards to assessing responsibility for the overall project delay. This issue may be
further complicated if the delay periods are of different lengths, the delay periods are
not totally concurrent, or the delays have a different impact in term of the number
and types of work activities they affect and the severity of that impact.
Until recently, when project was concurrently delayed by both a compensable
delay and non-excusable delay, neither party was allowed any affirmative recovery
from the other; that is, the proprietor was not entitled to recover liquidated or actual
damages for the period of delay and the executors was not entitled to recover delay
damages. Thus, in J.A. Jones Constr. Co. v. Greenbriar Shopping Center,22 when the
prime executor caused delay through the failure of its subcontractor and workers to
timely perform, and the proprietor caused delay by changes to the design and late
issuance of drawings, the court held that neither party was entitled to any affirmative
recovery. In such case, the proprietor and executor both bore their own costs even
though one may have been responsible for more delay than the other.
The executor generally assumes some delays for weather conditions and for
periods of labor non-availability. When delays are concurrently caused by the failure
of the proprietor to honor their commitments and the executor‟s lack of performance,
the courts have been prone to rule that each party must bear its own losses because of
the delays incurred. In other works, if the proprietor is remiss in meeting the
31
requisition payment schedule in the contract, and proprietor, arbitrarily, without any
written notice, slows down the job because of late payments. Neither party will be
able to collect on the damages attributable to the other party‟s delay.
2.4.3
Contract with No Provision for Delay
Some contracts are hushed on the issue of damages of delay. They contain no
expression which either establishes or denies the executor‟s right to be paid for the
extra costs associated with proprietor-caused delay. Under these circumstances, the
only way the executor can recover the costs and lost time associated with proprietorcaused delays is through a lawsuit proving breach of contract on the part of the
proprietor.
The particular breach that would have to be proved would be the breach of
the proprietor‟s implied warranty not to impede or interfere with the executor‟s
performance. Although a heavy burden, this is far better situation for the executor
than if the contract contained a no-damages-for-delay-clause. Of course, for the
executor, the best contract contains fair and equitable provisions promising
compensation for cost and time extension for delays caused by the proprietor.
2.5
Disputes
Construction is a dispute-prone industry, and claims are a fact of life. When
there is a dispute then there must have a claim to accommodate it. Due to vary
factors in the industry, many unexpected scenario might occurred in any stage during
course of project. From the claim, there will be a conflict in where every party will
try to maximize their revenue and refuse to accept claim from other party; disputes
occurred.
32
2.5.1 The Origin of Construction Disputes
Construction disputes are commonly known that it‟s originated from a variety
of causes, of which perhaps hundreds or thousands of specific ones can be named.
However, a survey of more than 300 relatively recent major disputes leads to the
conclusion that their causes can be largely traced into five causes.23
First cause is defects or errors from the contract documents. This can be a
simple or a catastrophic error in plans or specifications on the part of the designer, or
can stem from an error in reading or understanding the intention or scope of the
contract documents by the person who is the ultimate doer of the work and who must
first divine and then meet the intent of the designer. It becomes the major source of
construction disputes.
The second cause could be failure of someone to count the cost of the
undertaking in its beginnings. It could be that the constructor or proprietor
themselves did not properly understand the magnitude of the project‟s cost and then
finds itself in a position in which it must force the situation in order to meet its
economic limitations. To avoid financial losses, the designer might decide to take
short cuts for the studies, investigation, or whatever is needed to deliver the design
timely and satisfactorily to proprietor, if the designer‟s fee was not large enough to
accomplish the studies.
The initial failure to count the cost in a construction program accurately by
any and all of the participants is fertile ground in which to grow the construction
disputes. Builders, subcontractors, suppliers, and designers need to make a profit, as
do people in all endeavors. Poor estimates often reduce or eliminate the profit margin,
make the party with slim profit projections supersensitive, and lead to a search for
every opportunity to create income to recover estimate errors.
The third cause of construction disputes is the changed condition. The
conditions under which the project was envisioned or bid have seemingly changed.
Changed condition disputes often begin with the problem of deciding if the condition
discovered or experienced is in fact a changed condition. A change condition can
33
also have an impact on an entire project and cause what are known as ripple damages.
More often than not the scope and quantification of ripple damages comprise a
dispute of major proportion.
Consumer reactions are the fourth major origin of disputes. The rise of tenant
associations and a sense of a reality of public awareness have made the ultimate user
of a source of disputes. The recognition and enforcement of implied duties of the
builder have created many concerns not only for those who build and design but also
for those who finance and act as insurers and guarantors in the construction industry.
Unhappy end-user knows how to seek relief and many are pursuing relief effectively.
The last major cause of the construction dispute is the people involvement.
The construction business is a people business. The practices of the people of the
industry, their personal habits and idiosyncrasies, their interpersonal relationships,
the position and power, the hierarchies and tradition that encumber management in
all disciplines, the very basic fact that the construction business is one of reaction to
circumstances rather than planning, and the necessity for people to main their own
security are problems that are all fertile ground for disputes.
There is no question that certain management techniques can make delayoriented disputes an extra source of funds; in some cases, construction claims can
and have produced fee type income which is higher than the profit margins
contemplated when the project was bid or the project actually attained during
construction.
2.5.2
Disputes Resolution
Disputes are not instantly resolved. Just to start off takes a good length of
time before the necessity of recognizing, let alone solving, the dispute becomes a
hard fact in the minds of those involved. Once it becomes obvious that the other side
means business there is always chance, a hope in the minds of all, that something
34
will happen to eliminate the need to have to go through the difficult and un-pleasant
process.
If a dispute resolution method has not been mandated by the disputes
resolution clause of the contract, the unsatisfied party is free to file a lawsuit in a
court-of-law in the state or federal system.
2.5.2.1
Negotiated Settlement
The vast majority of disputes are settled by amicable negotiation leading to a
binding agreement. Such agreements are frequently made at the conclusion of a
project and include a full and final settlement of all claims by both parties; where
such agreement is commonly referred to as an “accord and satisfaction”.
Those settlements are variations to the existing contractual obligations and
hence need to be agreed by properly authorized agents of the negotiating parties;
likewise, the agreement must be entered into freely24 and supported by
consideration.25 A subsequent failure on the part of one of the parties to honor the
settlement will not revive the earlier contract; the appropriate cause of action is for
breach of the settlement agreement.
In principle, there is normally no need for a negotiated settlement to be put
into writing or indeed to be evidenced in any way whatever. It is enforceable if made
orally at the meeting.
2.5.2.2
Alternative Dispute Resolution
A range of techniques, known generically as Alternative Disputes Resolution
(ADR), has been developed to facilitate dispute resolution. ADR techniques such as
mediation have recently been introduced into a number of Standard Form of Contract,
including PAM form Rev. 2006.
The procedures available are infinitely adaptable and may be tailored to suit
the requirement of the parties.26 if the process is commenced pursuant to prior
35
agreement, the term of agreement must be complied with, unless a later supervening
agreement is made. Where an attempt at ADR process is a precondition to
commencing arbitration proceeding, this is not compulsory ADR which can better
derive as “agreement to agree” and unenforceable27 as all that can be enforced is that
the parties must go through motions.
2.5.2.3
Mediation
Mediation is a non-binding procedure. This means that if instituted as a first
step in resolving a dispute, either party to the process may decide to withdraw from
the proceeding at any time, and when the mediation session has been concluded the
parties are under no legal obligation to accept and abide by its conclusions. This
process usually involves engaging a professional mediator who will review the facts
surrounding the dispute and attempt to get each party to give a little, or sometime
more than a little, to resolve a dispute.
If mediation fails, each party must intensify the dispute up one further level
and request arbitration.
2.5.2.4
Arbitration
Arbitration is another method of dispute resolution. It is generally faster and
less expensive than court trials or hearing before administrative boards. Even so,
arbitration of large complicated cases can still be time consuming and expensive. The
arbitrators, who are usually working professionals, cannot sit continuously for
complicated cases, so the hearings are often fragmented, extending the time required.
Arbitration of a contract dispute cannot be compelled unless the contract
expressly requires it. The right to arbitration is not an implied right. However, if the
contract does require it, court will compel arbitration of the dispute on the demand of
either party.
Arbitration proceeding are much more informal than court litigation
proceeding. It is generally held in conference rooms in private locations. Depending
36
upon the arbitrator‟s dispositions, the proceedings may follow either structured or
less-disciplined styles.
Arbitration is usually heard before a retired judge or member of the bar
association There will be an arbitration panel of either one or few arbitrators. These
people will have various construction-related backgrounds. They might be attorneys,
contractors, architects, engineers, or anyone else with a familiarity with at least a
portion of the construction business. They may be less familiar with the technical
points of law, but their construction-related savvy can help to keep issues on relevant
tracks.
Arbitration is typically faster than a court suit. The reason arbitration is
generally faster than a court action are because the filing procedure, arbitrator
selection process, and calendar arrangement can be proceed in as little as month,
although few months to complete the process is more common. This is dramatically
faster than the court system, which may require literally years before a case can even
find its way onto a court calendar. Arbitration is thus, also a means to a quicker
solution.
2.5.2.5
Litigation
Litigation is the term used to describe dispute resolution in the courts. If
provision for arbitration or other dispute process is absent, the disputants will seek
the court for a forum to find relief. You must use the convention legal system for
disputes resolution. These are formal proceedings, as every court action is formal and
rigidly structured. There is an elaborate set of rules that permits only technically
correct claims to be filed. The technical merits of the case may play a
disproportionate part in the proceeding and significantly increase the time necessary
to present the case and / or defense.
Judges and juries, known in the legalese as the trier of fact, will be deciding
the merits of your case. It will be rare if either one has any construction experience,
but you can count on the fact that both will be long on common sense. A serious
disadvantage may be in their ability to grasp and believe important complicated
37
concepts, such as off-site overhead expenses in a delay situation. Their ability to see
through the fake may, however far outweigh the disadvantage.
Although the court fees themselves are generally or much less than the
arbitration filing and arbitrator‟s fee, the other factors involving technical
completeness and total time can increase total costs substantially. Only your
experienced attorney will be able to lay out for you the details of where you can
expect the total costs to wind up. Once you finally get on a court calendar, the actual
time to proceed through the entire action may be between months to years. It is many
times longer than arbitration, and can therefore lead to many times the total expense.
Court complaints are matters of public filing. They are open to public and all
documents are made a part of the court record. The proceedings themselves are open
to anyone who cares to drop in. if this for any reason presents a problem, it will have
to be well thought out before you proceed.
2.5.3
Disputes Avoidance
The proprietor is responsible for the satisfactory and timely completion of the
work. Yet much of the work will be done by contractors and suppliers. Successful
project performance depends on as more on the legal and business relation between
the proprietor with contractor and suppliers as on anything.
Unsatisfactory performance by a executor often generate disputes among the
proprietors, that executor and the proprietor, and possibly other subcontractor.
Disputes also arise between the prime contractor and the subcontractor from
problems for which the proprietor may be responsible. Similarly, a failure to perform
by the prime contractor affects everyone involved with the project.
These disputes are the things of which lawsuit are made. Unfortunately,
litigation is costly and time consuming, and it rarely produces a decision at the time
38
the problem arises. Thus, some of the considerations have to be made for the
avoidance of the above mentioned disputes, stated as below:
a)
Low Bidding Price
Price is an important consideration in selecting a executor. But the lowest
cost executor may turn out to be the most expensive one if the executor is unwilling
or unable to do the work.
b)
Familiarity with People
Dealing with irresponsible or unscrupulous parties very likely will result in
disputes. Avoidance of such problems begins at the bidding stage, when one side of
party identifies potential the other party with whom they will bid and are willing to
enter into executors for the work. They should consider the factors like reputation,
financial resources, experience and qualifications of opposition party.
c)
Payment Obligation
The obligation of proprietor to make timely progress payments or pay
retention sum to executor is almost inevitably area for disputes. Upon the signing of
the contract, the possibility of problems occurrence will not just end-up at the stage
of agreement administration. The most obvious problems are caused by delay in
payment or a dispute over the amounts earned for progress payments or for extra
work. The executor may find that unexpected circumstances during performance may
require a change in their expected payment procedures. If their actions to
accommodate the new circumstances are not carefully considered, unexpected results
may follow.
d)
Changes
One of the areas of frequent disputes in construction is the contract‟s changes
clause. For the proprietor, it is important that the contract specify a procedure for
allowing changes to the contract. The executor‟s primary concern is that it be
39
guaranteed the right to be paid for the work that is views as „extra‟. In addition, the
executor is frequently concerned that it not be required to finance, for an extended
period of time, a significant amount of „extra‟ work while waiting for the
determination of whether the work is „extra‟ or determination of the work‟s
reasonable value. The parties‟ competing interests lead to frequent disputes.
e)
Disputes Procedures
The determination to accept or include a specific dispute resolution provision
in a contract or subcontract involves both practical and legal considerations. This
decision must be made before the contract is executed. If the contract does not
contain a dispute resolution provision, disputes arising thereafter will be resolved
only if both parties so agreed. Such an agreement may not be easy to obtain after the
dispute has arisen.
It is generally desirable that the proprietor tie the executor to some specified
remedies and disputes process. Whether in court, arbitration, or an alternative dispute
resolution procedure, the executor should be required to pursue diligently and
exhaust those remedies and to be bound by the determination of its claims or rights
under specified disputes procedures.
f)
Remedies for Defective and Delayed Performance
Contract law generally provides that where the performance of a builder is
defective, the agreed contract price is subject to a deduction for the costs to remedy
the defect28. If an executor fails to perform its work, the proprietor may perform the
work, back-charge the executor, and deduct the back-charges from the executor‟s
progress payments.
A proprietor‟s decision to perform the executor‟s work assumes that the
executor is in default. That assumption carries with some risk. The proprietor runs
the risk of wrong guessing as to whether or not the executor has substantially
performed in the first instance and whether the back-charge is valid in the second. In
40
making such guessing, the proprietor may, by themselves, be committing a material
breach of the contract.29
When an executor fails to complete the work covered by its contract within
time specified, and the delay in completion is non-excusable, the proprietor is
entitled to recover any resulting, foreseeable damages.
2.6
Summary
This chapter deals with a review on construction contract. Various standard
forms of contract reviewed. The taxonomy of delay is examined in detail. The
chapter also highlighted how delay could contribute to dispute. Finally, the chapter
reviewed / studied the dispute resolution techniques practiced in the construction
industry.
CHAPTER 3
DATA COLLECTION
3.1
Introduction
Data collection is of the essence to ensure that the objectives of the studies
can be successfully achieved in a proper and structured way. To do so, proper and
correct research methodology have to be established to avoid deviation against the
set aim and objectives and given more understanding on how the study is to be
carried out in an effective manner.
3.2
Methodology of Study
The methodology of this study has been separated into few steps, namely
initial study and identifying the research issue, literature review, data collection,
research analysis, and conclusion and recommendation. This approach is to ensure
that the collection of the information and the data analyzing can be precisely
implemented. Figure 3.1 showing the flow chart for the approaches of the study‟s
methodology.
42
Initial Study and Identifying the Research Issues
Literature Review
Data Collection
Research Analysis
Conclusion and Recommendation
Figure 3.1 Research Process and Methods of Approach
Step 1:
Initial Study and Identifying the Research Issue
Intensive reading of journals, books and articles and online resources from
varies library was done in order to obtain the clear concept of the study objective.
Libraries attended are:
-
National Library, Kuala Lumpur;
-
Library of The Institute of Engineer, Malaysia, Petaling Jaya;
-
Library of Universiti Teknologi Malaysia, Jalan Semarak, Kuala Lumpur.
Through the above reading, facts related to the study‟s objective were
identified. Among the indentified issues that need to be reviewed are:
43
-
Fundamental of Construction Management studies;
-
Recent trends of Construction Industry in Malaysia;
-
Malaysia Law;
-
Construction Contract Law;
-
Litigation Cases for Malaysia Construction Industry;
-
Disputes Resolution;
-
Time Delay Studies.
Step 2:
Literature Review
From the above-mentioned identified study‟s issues, basic ideas of the issues
were collected and summarized into a proper arrangement. Sources of the collection
are mainly from published books obtained from above-mentioned libraries. The
online journals were also been referred; obtained from UTM‟s library electronic
database, namely Lexis-Nexis Legal Database. Furthermore, it is indeed to have a
copy of PWD 203A Rev. 2007 and PAM (with quantities) Rev.2006 Standard Forms
of Contract for more detailed reference on current contract implementation
circumstances.
A brief discussion on the origin of Malaysia law has been undertaken. It is
important to identify the development and trends over the time for law of Malaysia
construction industry so that better idea can be obtained for the following discussion.
Concentration was then focused to the basic understanding of the application of
Standard Forms of Contract in Malaysia construction industry and its types of
standard form of contract which are commonly practiced.
Fundamental of the time delay issue in construction industry is discussed.
Concept of the time delays, types and effects of the delay in construction industry,
cases from past studies are all been discussed in this topic of study. These were set as
primary studies to provide a principle idea later in the research‟s discussion.
Debate was then turned to dispute‟s related issue where the origin of the
disputes and its remedy steps namely dispute resolution and its avoidance steps were
discussed.
44
Step 3:
Data Collection
Legal cases based on previous court cases, journals, papers, reports which are
related to the time delay disputes in construction industry are collected from Malayan
Law Journals via UTM library collection and electronic database. Primary data:
electronic database, secondary data: books, act, articles, seminar papers and etc.
Preliminary target is set to collect minimum 30 numbers of litigation cases
which involved the final judgment of time delay disputes in construction industry at
Malaysia.
Finding of data were done using search menu in UTM‟s library, Lexis and
Nexis Legal Database. The words „time‟, „delay‟, „contract‟, „dispute‟, „extension of
time‟, „construction‟, „standard form of contract‟, and etc were used for the data
search purpose via the above-mentioned internet database. Data are filtered
according to the need of the research.
Focus is set at three field of data; Malaysia Law and Journals, Malaysia Law,
Journal and Articles and Malaysia Law and Journals – unreported. From each field of
data, two searches are carried out using preferred key words as mentioned above. A
hundred cases are listed from each attempt on search via Lexis and Nexis Legal
Database.
From the list, highlighted words / sentences from each case are read and
filtered as only cases related to construction issue were selected. 141 cases are
selected and downloaded from database in this stage of filtering process. Later,
filtering process is continued through the intensive cases reading and finally the
extraction of cases that are only related to the dispute in regard to delayed in the
process of construction project; 18 cases are chosen for indeed further analysis in
following step of research.
Among the 18 selected cases, the judgment decided dates are within the
period of 28th February 1963 to 15th January 2009 which is believed adequate for this
45
research reporting to lodge enormous range of data within years. Courts involved are
listed below:
a) Federal Court (Kuala Lumpur, Kuching)
b) Court of Appeal (Kuala Lumpur, Putra Jaya)
c) High Court (Kuala Lumpur, Sibu, Ipoh, Taiping, Miri, Kuching, Kota
Kinabalu)
d) Supreme Court (Kuching)
It is significant that the delay dispute in relate to project undertaking might
involve huge volume of claims as it mostly goes through the proceeding in High
Court. In the other hand, it might also forward through the appealed cases which
have further dragged in the High Courts.
Step 4:
Research Analysis
Once the data are collected, case study is conducted on the related legal cases.
All the fact of the cases are reviewed and clarified. Focus point is on the disputes
associated with the time delay in construction which is referred to the court and the
consequences of time delay disputes towards the parties involved in the contract.
Further to this, discussion and comparison are finalized.
The most frequent disputes associated with the time delay in construction
which are referred to the court are compared and identified. The content analysis is
carried out via intensive interpretation on each case for its theme of dispute and trend
of the judgment; discussions and views from the judgment which cited and testified
from the statement made by the Judge were extracted as part of the basis data for the
discussion in relate to the dispute avoidance. The same also carried out to the
consequences of the time delay disputes toward the parties involved.
Step 5:
Verification
In the effort to look for the support and verification to the research output, a
brief interview is carried out with two experienced industry practitioners who have
intense background in this industry.
46
First interviewee who supports my research output by giving his immersed
experienced opinion is Mr. Lim Eng Chong. Mr. Lim Eng Chong involved in law
industry business for more than 25 years and his business focus is now on the
construction disputes since more than 10 years ago. He managed a well established
legal firm and was invited to be a legal adviser for several construction companies.
Tasks delegated to him are legal letter drafting, advice on legal approaches relate to
construction work as well as disputes settlement approaches.
Second interviewee is Mr. Loh Chin Yun. Mr. Loh Chin Youn was an old
timer of the industry which already involved in the construction industry for more
than 20 years. As a director to the time-honored construction company, he took part
in the scope of contractor‟s site management especial dealing with inter-parties
among the top management.
This research is successfully carried out through the assistance from both of
the above-mentioned interviewee to facilitate extra data to the success of this
research.
Step 6:
Conclusion and Recommendations
Conclusion and recommendations will be made based on the findings during
the stage of analysis.
CHAPTER 4
ANALYSIS AND DISCUSSION
4.1
Introduction
This chapter analyses the data collected from the UTM‟s Lexis and Nexis
Database. The court cases from Malaysia Law Journals which are delay-related was
analyzed and summarized. Out of 600 cases searched result, total of 141 cases are
chosen for further reading and finally 18 cases were selected for the project report
which disputed are related to the delay in project under taking.
4.2
Position in Selected Malaysia Cases
All 18 cases selected from Malaysia Law Journal (MLJ) were summarized as
follows:
1.
Haji Hasnan vs. Tan Ah Kian ([1963] 1 MLJ 175)
The appellant not satisfied with the progress after the inspection on the final
completion date; they terminated the contract with respondent and entered
into fresh contract with another person for the completion of the work;
request of the extension of time by respondent was ignored and not being
granted. Judgment having been entered for the respondent as claimed and the
appellant appealed. The Court of Appeal held that no timely or reasonable
notice given by appellant for the contract termination as the appellant ignored
48
the request of extension of time even the delay of project was not critical. The
appellant was in breach of his contract. The respondent entitled to recover on
the basis of quantum meruit.
2.
Shen Yuan Pai vs. Dato Wee Hood Teck & Ors ([1976] 1 MLJ 16)
The plaintiff claimed payment was not received and counter claim of the
defendant was founded on, delay in the completion of construction work by
the plaintiff and accordingly claimed for the loss of profits and damages for
non-completion of work within the time specified in the contract. The Court
held that delay was solely by the defendants‟ default in not taking action with
regard to the specialists‟ works and not responding to the letter of reminder
from plaintiff pertaining to the delay by the specialist. The plaintiff claim for
non-payment on completed work done allowed; the respondent counterclaim
dismissed.
3.
How Loon Sim vs. Lipson Realty (Malaya) Sdn Bhd ([1976] 2 MLJ 76)
Dispute arose when both appellant and respondent not satisfied with learned
trial judge‟s award and come with the appeal and cross-appeal. The Federal
Court Civil Appeal held that the learned trial judge was correct in holding
that the respondent could not succeed on the counterclaim as the delay in
completion was initially caused by the failure of the respondent‟s architect to
secure approval of the plans relating thereto.
4.
Sim Chio Huat vs. Wong Ted Fui ([1983] 1 MLJ 151)
The learned trial judge upheld the respondent‟s counterclaim and assessed the
liquidated damages under the contract; the appellant appealed against the
decision. The Federal Court Civil Appeal held that, by allowing the delivery
dates to pass by and by acquiescing in the work continuing under the contract
and indeed by ordering extra work to be done, for which the contract made no
provision, the respondent must be to have waived his right to rescind the
agreement on account of repudiation and also the right to treat himself as
49
discharged there from; he must be deemed to have elected the agreement as
still continuing; respondent could not succeed in his counterclaim for
damages as he was responsible for the delay in ordering extra work and for
late delivery of the site possession; the appellant‟s appeal against the
liquidated damages is allowed.
5.
Syarikat Soo Brothers Construction vs. Gazfin Sdn Bhd ([1989] 1 MLJ 64)
In this case the plaintiff claimed the money due on a certificate issued by the
architect sub-sequenced to the delayed in making payment. The defendant did
not dispute the amount claim but stated that as there was delay in the
completion, it was entitled to damages. The High Court held that, time was
no longer of the essence of the contract as the defendant did not object the
default by plaintiff and never give notice to change the completion date and
accepting completion date has passed. The defendant was not entitled to
liquidated and ascertained damages as the court was not in a position to
ascertain when the claim for damages should commence. The defendant was
not entitled for damages claim.
6.
Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd ([1992] 1
MLJ 42)
The case was disputed over the issue of defects, alleged late handing over
keys and un-paid of amount due to plaintiff; the defendant resisted the
plaintiff‟s claim in three ground, the work executed was defective, the
plaintiff was late in completion and the plaintiff wrongfully detained keys to
houses built causing the defendant to be liable to damages for late delivery
and accordingly the defendant claim for the liquidated damages claim. The
extension of time was granted by the architect as the delay is caused by extra
work ordered by architect; the grant of an extension of time exonerated the
plaintiff from liability for liquidated damages. Judgment for the plaintiff in
the sum as claimed.
50
7.
Thamesa Designs Sdn Bhd & Ors vs. Kuching Hotels Sdn Bhd ([1993] 3 MLJ
25)
In this case, the dispute was firstly arise from non-payment for work done;
the appellants sued the judgment debtor and obtained judgment for a sum
which had remained unsatisfied. They then proceeded with garnishee action
against the respondent, the employer of the judgment debtor, to garnish the
retention money in the hands of the respondent. The respondent contended
that there was no money to be attached because the retention fund had been
utilized to pay for the cost of rectification of defects and for liquidated
damages to account for the delay in completion of the works. The appellant
challenged the validity of the final certificate in respect of the imposition of
liquidated damages. The learned trial judge held the certificate of final
completion was valid; the appellant have appealed. The Court of Appeal held
that the facts showed the defendant handed over the site late, the time for
completion becomes at large and there was no date from which the damages
could be assessed; the respondent have therefore lost their right to claim for
liquidated damages, the final certificate had become invalid. The appellant‟s
appeal allowed.
8.
Tiong Hung Ming vs. Kalimantan Hardwood Sdn Bhd ([1994] 3 MLJ 656)
Dispute in case arises when the plaintiff claimed that the defendant had
avoided payment due to him while the defendant argued that the plaintiff had
breached the agreement by delaying completion of works due to numerous
stoppages of works. The High Court held that the defendant had dispensed or
waived the breaches alleged to have been committed by the plaintiff where, in
spite of the termination, the defendants continued to engaged and deal with
the plaintiff. The plaintiff was entitled for the sum claimed.
9.
Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd ([1995] 1 MLJ 214)
The plaintiff in this case is claiming for damages for wrongful termination of
contract and contended that the delay was caused by the defendant‟s delay in
51
handing over sites and the lack of drawings and specifications and so on.
After the trial, the High Court held there appeared to be suspension and
stoppages of work by plaintiff and delay was caused partly by the lack of
proper site organization by plaintiff and the plaintiff might as well failed to
comply with the notice to step up work as well as the notice to rectify works;
the determination of the contract by the defendant was justified.
10.
Larut Matang Supermarket Sdn Bhd vs. Liew Fook Yung ([1995] 1 MLJ 375)
Delay occurred in the process of obtaining approval of the building plans
through no fault of the plaintiff. The defendant was briefed about the delay
but did not raise any objection regarding this issue. Without the plaintiff
knowledge, the defendant obtained approval of his own and commenced the
construction work. Thus, the plaintiff sought the return of the deposit; the
defendant counter claim for the amount paid to the plaintiff as interest and
special damages for the purported loss rental of the buildings. The High Court
held that the defendant could have revived time as the essence of the contract
but not does so and allow the work to continue. Time has been waived. The
delay was caused by bureaucratic red tape and the plaintiff had at all times
acted with due diligence and speed on his obligation. The plaintiff claim
allowed and the counterclaim by the defendant dismissed.
11.
Ley Boon Hee vs. Mohamed & Sons Construction ([1995] MLJU 304)
The plaintiff claimed for the payment of retention sum and damages for
breach and repudiation of contract by defendant on the issue of determination
of the sub-contract agreement. Argument was on the delay in work
completion where plaintiff contended delay might cause by the labour
shortage, increment weather, topography and the acts or omissions of JKR.
The defendant denied the allegations of the plaintiff and in turn avers that it
was the plaintiff‟s inability to perform that led to the determination of the
Sub-Contract Agreement. The High Court held that the plaintiff had failed in
their coordination works and missed the action with costs.
52
12.
Sim Hiang Kiaw & Ors vs. Lee Hoi Kim Construction Co ([1995] MLJU 444)
The dispute started with the claim from plaintiff for the pre-liquidated
damages against the defendant for the late delivery of completion of the
construction. It was proofed that the late of site possession as well as extra
work required by the plaintiff have caused the delay of work completion. The
defendant suffered substantial loss when the plaintiff purposely delayed and
refused to pay the progress payment due to the defendant. The High Court
held the plaintiff‟s claim dismissed and allowed the defendant‟s counterclaim.
13.
John Holland International Pty Ltd vs. Yong Piling Contractor ([1996]
MLJU 579)
Argument commenced from the defendant where they stopped the piling
work awarded to them without completing the job as they claimed the
plaintiff failed to pay them the progress payment as well as for the extra
works performed. As a result the plaintiff had to finish the work to avoid
further delay to the work. The work was finally completed although with
some delay. The plaintiff was penalized. The plaintiff blamed the defendant
for stopping work and for the delay. The defendant denied any fault. The high
court held that the defendant cannot prove to judge the document of nonpayment. Thus, their claim dismissed. The defendant had breached the subcontract when they stopped work. Nevertheless, the defendant was allowed to
recover the quantum meruit.
14.
Teo Hock Guan & Anor (T/A Teo Meng Huah Construction) vs. Johore
Builders & Investments Sdn Bhd ([1996] 2 MLJ 596)
This case was held earlier at High Court where the High Court allowed
liquidated damages claimed by the plaintiff (respondent). The defendant
(appellant) appealed against the part of judge which was in the plaintiff‟s
favour. They stated that the judge had overlook the fact that the plaintiff had
requested the defendant to undertake additional works and the defendant
alleged that time ceased to be of the essence under the contract when
53
additional works were ordered and undertaken. The Court of Appeal held that,
it was not part of the defendant‟s case that the delay had been occasioned by
the extra work as there was absence of any suggestion during the crossexamination of the plaintiff‟s witness to the effect that the delay had been
caused by such work. Thus, the appeal was dismissed.
15.
Vistanet (M) Sdn Bhd vs. Pilecon Civil Works Sdn Bhd ([2005] 6 MLJ 664)
Case was held when the defendant delayed and suspended work with no
credible assurance as to when the defendant would complete the project. The
plaintiff claimed that the defendant had breached the contract and had
determined the defendant‟s employment. The defendant disputed as to
whether the plaintiff was entitled to terminate their contract. The High Court
held the application by the plaintiff for the injunction against defendant was
allowed.
16.
Nirwana Construction Sdn Bhd vs.Pengarah Jabatan Kerja Raya, Negeri
Sembilan Sarul Khusus and Anor ([2008] MLJU 0171)
The appellant failed to complete the work within the time stipulated where
the defendant refused to acknowledge the completion of work which was
accepted during course of work. Court of Appeal concluded that the
termination of contract by the defendant was unlawful in which the project
was accepted and handed to client but the defendant still contended that
works was not completed and delay. Thus, the appellant claim for unpaid
contract sum and general damages allowed, the defendant counter claim on
liquidated damages dismissed.
17.
Mn Construction Sdn Bhd vs. Evelyn @ Evelyn Sudan Ak Augustine and
Other Suits ([2009] 7 MLJ 24)
The plaintiff contended that they had diligently acted upon the development
agreement and obtained the necessary approvals from the relevant authority.
There were some delays on progress of the development. When the plaintiff
54
was about to commence the construction works, the defendant terminated the
agreement but later withdrew the said termination letters. Nevertheless, the
plaintiff was still prevented or disallowed from commencing with the project
as a result of which they had incurred expenses and stood to suffer a huge
loss of profit which the defendant were in no provision to compensate. In
consequence, the plaintiff was seeking, for specific performance and damages.
The defendant however, counterclaimed against the plaintiff, for a declaration
that the defendant had validly terminated the said agreement. They alleged
that the plaintiff was in breach of the development agreement for failing to
obtain approval for the subdivision of the land and the building and
engineering plans within two years from the date of the said development
agreement. The High Court held that, despite five years of the signing of the
development agreement, the plaintiff had barely started with the construction
works. It was abhorrent to notions of justice and fair play to condone the
delay. In the circumstances, there was merit in the defendant complaint of
delay and in consequence the defendant had rightfully terminated the
development agreement. Thus, the Judge dismissed the plaintiff‟ claim and
the defendant‟s counterclaim with no order as to costs.
18.
Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn Bhd
([2009] MLJU 0049)
The case was brought from the previous court judgment where the appellant
not satisfied with the remaining claim amount which disputed by the
defendant that the amount was deemed to be liquidated damages claim and
remaining as claimed as works done not in the original contract. It was held
that the delay was caused by the respondent nominated sub-contractors
carrying out their respective works. There were also additional work imposed
by the respondent and the late confirmation of the material used, and the
evidence adduced were raised without there being any objection. The granting
of the extension indicated a waiver of the condition for making time the
essence of the contract. The appellant application is allowed.
55
4.2.1 Causes of Delay Disputes
Upon the delay occurred to the project undertaking, the dispute will always
arise if either party do not have their common understanding on why the project
slipped over the agreed completion date. As we discussed in the literature part, it will
either excusable or non-excusable type of the delay. And from the excusable type of
delay, it further divided into compensable and non-compensable as it depends on
which parties responsible for the cause of the delay.
In the study, the extraction of the delay causes within the selected cases was
stipulated as the delay causes which have been demonstrated by the judgment of the
particular case. Some delay causes were debated in the case but not taken into
consideration due to the lack of convincing statement.
The causes of delay which are categorized as excusable and compensable are
mainly due to default by proprietor where the executors have no control on it. From
the selected cases, the causes of delay are generally due to failure to give timely
order for work, failure to coordinate nominated contractor, excessive change order of
work, improper site preparation, failure to give timely payment to executor, defective
drawings and specification by proprietor, and suspension / stoppage as order by
proprietor.
For the excusable and non-compensable type of delay, the causes disclosed
from the selected case are bureaucratic red tape, weather, acts of God and labor
Problems. The parties have no control to avoid it to be happened from this type of
delay causes.
The causes of delay which the executors, by mean of contractor or subcontractor, can control or to avoid it from happening and categorized as nonexcusable delay, as demonstrated in selected cases, the executor has no right to
recover any losses due to the delay, in fact, has to pay for the liquidated damages
claim by the proprietors. Those delays are mainly caused by their inability in work
coordination and lack of professional responsibility in executing their work.
56
Causes of delay dispute from selected cases are summarized and shown as
below:
Litigation as Dispute Resolution in Addressing Delay Dispute
34
33.33
Numbers of Cases
involved
32
30
33.33
Percentage
27.78
28
26
24
22.22
22
20
16.67
18
16.67
16.67
16
14
11.11
12
11.11
10
8
6
5
6
4
6
5.56
4
2
3
3
1
2
2
3
(Un-excusable delay) - Within Executor control
Weather, Acts of God and Labor Problems
Bureaucratic red tape
Suspension / Stoppage
Defective Drawings or Specifications
Failure to Make Timely Payments to Contractors
Improper Site Preparation
Excessive Change Orders
Failure to Coordinate Prime/Nominated Contractor
Failure to Give Timely Orders for Work
0
Causes of Delay Disputes
Figure 4.1: Summary of Delay Dispute Causes from Selected Cases
Figure 4.1 shows that the order for work issue was the most significant causes for
the occurrence of delay dispute as 6 out of 18 cases or 33% agreed to the fact. This
shows that most of the delay disputes were caused by failure in given instruction.
57
Defaults by executors which are classified as non-excusable delay also show at the
same degree as above-mentioned cause.
Next to the order for work are excessive change order which captured 27.78% of
the selected cases, improper site preparation, 22.22%, failure to make timely
payment, 16.67%, defective drawings or specification, 16.67%, failure to coordinate
prime/dominated contractors, 11.11% and suspension / stoppage, 5.56%. These
factors are the default by proprietor.
Causes of delay dispute which are not by default of both executor and proprietor
also debated in the selected cases. This includes delay by Bureaucratic red tape issue
which stand at 11.11% while delay caused by weather, act of God and labor problem
represents 16.67% of the causes under the analysis.
18 cases of litigation case selected from the findings are listed are below:
i)
Cases with debate on delay caused by “Failure To Give Timely Order For
Work”:
Haji Hasnan vs. Tan Ah Kian [1963] 1 MLJ 175
Shen Yuan Pai vs. Dato Wee Hood Teck & Ors [1976] 1 MLJ 16
Syarikat Soo Brothers Construction vs Gazfin Sdn Bhd [1989] 1 MLJ 64
Larut Matang Supermarket Sdn Bhd vs. Liew Fook Yung [1995] 1 MLJ
375
Nirwana Construction Sdn Bhd vs. Pengarah Jabatan Kerja Raya, Negeri
Sembilan Sarul Khusus And Anor [2008] MLJU 0171
Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn
Bhd [2009] MLJU 0049
ii)
Cases with debate on delay cause by “Failure To Coordinate
Prime/Dominated Contractors
Haji Hasnan vs. Tan Ah Kian [1963] 1 MLJ 175
Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn
Bhd [2009] MLJU 0049
58
iii)
Cases with debate on delay caused by “Excessive Change Orders”
Sim Chio Huat vs. Wong Ted Fui [1983] 1 MLJ 151
Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd [1992] 1
MLJ 42
Sim Hiang Kiaw & Ors vs. Lee Hoi Kim Construction Co [1995] MLJU
444
Teo Hock Guan & Anor (T/A Teo Meng Huah Construction) vs. Johore
Builders & Investments Sdn Bhd [1996] 2 MLJ 596
Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn
Bhd [2009] MLJU 0049
iv)
Cases with debate on delay caused by “Improper Site Preparation”:
Sim Chio Huat vs. Wong Ted Fui [1983] 1 MLJ 151
Thamesa Designs Sdn Bhd & Ors vs. Kuching Hotels Sdn Bhd [1993] 3
MLJ 25
Sim Hiang Kiaw & Ors vs. Lee Hoi Kim Construction Co [1995] MLJU
444
Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd [1995] 1 MLJ 214
v)
Cases with debate on delay caused by “Failure to Make Timely Payments
to Contractors”
Syarikat Soo Brothers Construction vs. Gazfin Sdn Bhd [1989] 1 MLJ 64
Sim Hiang Kiaw & Ors vs. Lee Hoi Kim Construction Co [1995] MLJU
444
John Holland International Pty Ltd vs. Yong Piling Contractor [1996]
MLJU 579
vi)
Cases with debate on delay caused by “Defective Drawings or
Specifications”
How Loon Sim vs. Lipson Realty (Malaya) Sdn Bhd [1976] 2 MLJ 76
Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd [1992] 1
MLJ 42
Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd [1995] 1 MLJ 214
59
Cases with debate on delay caused by “Suspension / Stoppage”
vii)
Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd [1992] 1
MLJ 42
viii)
Cases with debate on delay caused by “Bureaucratic Red Tape:
Larut Matang Supermarket Sdn Bhd vs. Liew Fook Yung [1995] 1 MLJ
375
Mn Construction Sdn Bhd vs. Evelyn @ Evelyn Sudan Ak Augustine And
Other Suits [2009] 7 MLJ 24
ix)
Cases with debate on delay caused by “Weather, Acts of God and Labor
Problems”
Haji Hasnan vs. Tan Ah Kian [1963] 1 MLJ 175
Ley Boon Hee vs. Mohamed & Sons Construction [1995] MLJU 304
Sim Hiang Kiaw & Ors vs. Lee Hoi Kim Construction Co [1995] MLJU
444
x)
Cases with debate on delay caused by “(Non-excusable delay) - Within
Executor control”
Tiong Hung Ming vs. Kalimantan Hardwood Sdn Bhd [1994] 3 MLJ 656
Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd [1995] 1 MLJ 214
Ley Boon Hee vs. Mohamed & Sons Construction [1995] MLJU 304
John Holland International Pty Ltd vs. Yong Piling Contractor [1996]
MLJU 579
Teo Hock Guan & Anor (T/A Teo Meng Huah Construction) vs. Johore
Builders & Investments Sdn Bhd [1996] 2 MLJ 596
Vistanet (M) Sdn Bhd vs. Pilecon Civil Works Sdn Bhd [2005] 6 MLJ 664
Each case has its different facts; hence content analysis is preferable in this
analysis. The uniqueness of each case means that the statistical analyses become
inappropriate.
60
4.2.2 Review of the Causes for Delay Dispute in Project Completion
Previous section provides a brief of the selected cases related to the dispute
arising due to delayed in contract work completion which is referred to the court.
There are 18 cases referred to the court due to the delay in construction project
undertaking which are selected under the Malaysia Law Journal. Among the selected
cases, causes of delay which were debated are mostly deal with the failure of parties
to obey their responsibility such as failure to give timely payment, failure to
coordinate nominated contractors, failure to give timely order of work, late in site
possession, failure to control and plan the work, etc. Each is discussed below.
4.2.2.1
Failure to Give Timely / Adequate Orders for Works
Failure to give timely work orders is always the concern for one in their
planning of work to enable them to expedite their progress of work. As an example
from case Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn
Bhd [2009] MLJU 004, their late rejection of the Pantech Solid Aluminium Panels
was testified as one of the cause contributed the delay to the project completion.
From the study, also found that the ignorance or failure to given notice to
change completion date also become an issue for the dispute arisen; the failure of
proprietor to uphold the initial completion date due to the instruction given by
proprietor to temporary suspend the work, ordering excessive variation work, late in
site handing over for possession and etc, have make the time is not of the essence of
contract in which this issue was always be disputed upon the occurrence of delay in
project progress. This issue was clearly stipulated in the case Haji Hasnan vs. Tan Ah
Kian [1963] 1 MLJ 175 and Syarikat Soo Brothers Construction vs Gazfin Sdn Bhd
[1989] 1 MLJ 64 in which the time has deemed and accepted to have passed and
became at large.
One more issue in regard to the works order was read in case Larut Matang
Supermarket Sdn Bhd vs. Liew Fook Yung [1995] 1 MLJ 375 where the ignorance of
proprietor to acknowledge the delay occurrence as briefed by executor during several
meeting and the proprietor did not raise a single objection or instruction for the
61
resolution regarding the delay. No action was taken until the delay really takes place
at the end of project and both parties disputed the issue. Similarly, in Shen Yuan Pai
vs. Dato Wee Hood Teck & Ors [1976] 1 MLJ 16 read that the proprietor not
responding to the letter of reminder by the executor pertaining to delay by the
specialist work and not taking any initiative steps such as given instruction to
expedite the work, but disputed the issue upon the completion of project.
4.2.2.2
Failure to Coordinate Prime / Nominated Contractors
Cases where the delay of project completion caused by the prime / nominated
contractors as perceptibly read in Haji Hasnan vs. Tan Ah Kian [1963] 1 MLJ 175
and Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn Bhd
[2009] MLJU 004.
As written at page 452 paragraph 862 of Halsbury's Laws of England, 3rd
Edition, Volume 3, which reads as follows:
“Effect of failure of sub-contractors, or independent contractors
... If, however, the specialists are not sub-contractors of the builder but are
employed by the building proprietor direct, then he will, in the absence of a
contrary stipulation, be responsible to the contractor for delay caused by
them."
The executor who is not in direct contract with the specialists or subcontractors employed by the proprietor should not responsible for the fault made by
those mentioned specialists or sub-contractors. In the above two cases, there was
delay caused by the proprietor‟s nominated sub-contractors who carrying their
respective works and the proprietor was held not entitled to the liquidated and
ascertained damages claimed by them.
4.2.2.3
Excessive Change Orders
Another cause of delay which should be responsible by proprietor is ordering
the variation work or change order. In the case of Sim Hiang Kiaw & Ors vs. Lee Hoi
62
Kim Construction Co [1995] MLJU 444, the delay was caused by the shop-owner
themselves who wanted certain work done and this necessitated extra work required
by proprietor.
The principle in Dodd v Churton [1897] 1 QB 562 can be applied, where at
page 156, it stated:
Only in circumstances in which the employer or his agent is in no way to
blame for the delay would the court be willing to allow damages. If the
employer contributes to the delay by ordering extra work or is guilty of the
delay in delivering possession of the site, or of any other cause no damages
could be claimed.
Once again the proprietor is accountable to the delay of project completion
and their claim for damages was dismissed.
In the case of Sim Chio Huat vs. Wong Ted Fui [1983] 1 MLJ 151, by
ordering extra work to be done for the house units, for which the contract made no
provision, the proprietor was held to have waived his right to rescind the contract on
account of repudiation and also the right to treat himself as discharged there-from.
He was deemed to have elected the contract as still continuing and such failure have
prevent him from claim the liquidated damages.
4.2.2.4
Improper Site Preparation
The term of site preparation in this study mean the readiness of site by
proprietor for the possession of executor to commence the contracted work. In this
issue, proprietors are the party who liable if the late of site preparation emerged.
As stated in the case of Thamesa Designs Sdn Bhd & Ors vs. Kuching Hotels
Sdn Bhd [1993] 3 MLJ 25, facts showed that the proprietor handed over the site late
which led to the delay on the part of the executor to complete the works and
therefore, it is patently clear that the proprietor should not be entitled to claim for
liquidated damages under the said contract, because by his omission to give
63
possession of the site in time, the time for completion becomes at large and there was
no date from which the damages could be assessed. The court in the case considered
and applied the principle in Dodd v Churton [1897] 1 QB 562, and stated at p 156:
At the risk of repetition we restate the principle in that where one party to a
contract is prevented from performing it by the act of the other; he is not
liable in law for the default.
The proprietors had therefore lost their right to claim for liquidated damages
and to be responsible for the delay of the project completion.
4.2.2.5
Failure to Make Timely Payments to Contractors
Payments are the most imperative items in the construction contract. With the
principle of revenue based activity, owing or retention of payments always cause the
divergence between party.
Case of John Holland International Pty Ltd vs. Yong Piling Contractor [1996]
MLJU 579 stipulated the dispute arise after the appearance of delay in project
completion where the executor revealed that their stoppage of work was an
consequence from the non-payment from proprietor during the course of construction.
The conflict ended up in where the executor cannot prove to the court the document
of non-payment and held liable to the breached of contract agreement for their work
stoppage.
Payments issue also arises in the case of Syarikat Soo Brothers Construction
vs. Gazfin Sdn Bhd [1989] 1 MLJ 64 where the court suit was filed by the executor
due to the failure of proprietor in making payment to them; proprietor disputed as the
project have been delayed and was a default by executor and they are acquiring the
claim for liquidated damages from the executor. The proprietor failed at the end of
the trial as court held that the proprietor did not object the default and never give
notice to change the completion date and accepting completion date has passed. Time
is no longer the essence of the contract and the proprietor is liable to the delay.
64
4.2.2.6
Defective Drawings or Specifications
In the application of extension of time for project completion, there are
always the issues on the lack of adequate construction drawings or specification of
work due to the non-correlation between the parties in the issuance of such drawings
or specification.
In the case of Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd
[1992] 1 MLJ 42, the extension of time was granted by architect as the late deliverly
of the details for the extra work was one of the reason in approving the time
extension. The issue was then disputed on the validation of the granted extension of
time and the court held that the extension of time is reasonably granted, the
proprietor‟s claim dismissed.
4.2.2.7
Suspension / Stoppage
Suspension of work by proprietor is another excusable and compensable type
of delay which is due to the default by the proprietor.
As in Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd [1992]
1 MLJ 42, the proprietor contended that the executor was late in completion entitled
them to claim for the liquidated damages despite the architect having granted the
extension to the executor in respect the delay was caused by the postponement of
work ordered on the proprietor‟s behalf. But the court later held that the grant of an
extension of time has exonerated the executor from the liability for liquidated
damages and the judgment is for the executor in the sum as claimed.
4.2.2.8
Bureaucratic Red Tape
In this session, we review against the delay caused by the late of the plans
submission to relevant authorities as per case in Larut Matang Supermarket Sdn Bhd
vs. Liew Fook Yung [1995] 1 MLJ 37.
65
It was proprietor‟s contention that the executor was instrumental for
prolonged delay in obtaining the approvals from the relevant authority and such
delay had cause loss and damage to the proprietor. The executor argued otherwise
and submitted that they were not responsible for the delays as it had no control over
the relevant authorities. The power to approve building plans was not with the
executor but with the relevant authorities. The court later held that the executor
should not be blamed as they had at all times acted with due diligence and speed and,
consequently, had not breached the term as to time as set out in the agreement.
4.2.2.9
Weather, Acts of God and Labor Problems
The delay due to the weather, acts of god and labor problems like strike are in
fact the well-known scenario in the construction industry which it is indeed unavoidable by either party.
With its nature of unpredictable and abnormal in its circumstance, the
executor is normally entitled to claim for the extension of time. In Haji Hasnan vs.
Tan Ah Kian [1963] 1 MLJ 175, and executor‟s application for extension of time due
to extreme weather was ignored by the proprietor. The proprietor terminated the
contract due to the delay in progress but later was held by court that the termination
was un-lawful as the extreme change in the weather should be deemed as excusable
excuse and the executor should not liable to it.
4.2.2.10
Non-excusable delay - Within Executor Control
As opposed to the above discussed causes of delay, the non-excusable delay
means that the executor is not entitled for any damages claim as they are in the
position of the control for the alteration of time.
As held in Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd [1995] 1 MLJ
214, after the termination of contract by the proprietors, the executor trying to escape
from the blame for the delay of project completion which caused by the lack of their
proper site organization and also the coordination works. They in this action, are
claiming for damages for wrongly termination. The court finally held that the
66
termination of contract is lawful and it was testified that the delay was fault by
executor which they should be liable for their misconduct in work.
4.2.3 Court Suit Filling
Comparison of Pencetages: Party Involve in Filling the Court
Suit
22%
78%
Filed by Executor
Filed by Proprietor
Figure 4.2: Percentage of Parties’ Contribution on Court Suit Filling
Figure 4.2 shows that the majority parties who responsible in filling the court
suit among the selected cases are contributed by the executor which represents 78%
out of overall court filling contribution. The proprietor only contributed 22% and
become the minority parties who has tendency in filling court suit among the selected
cases.
67
4.2.4 Court Judgment
Final Judgment was delivered based of the final decision of which party is
responsible to the delay.
Final Judgment (I)
Judgment for Plaintiff/appeallant
Judgment for Respondent/Defendant
No Deal
5.55
27.78
66.67
Figure 4.3: Judgment Comparison between Plaintiff / Appellant and Defendant
/ Respondent
The comparison of final judgment from selected cases which favored to
plaintiff / appellant or defendant / respondent was shown in Figure 4.3. The judgment
favor to the plaintiff / appellant represents 66.67%. Meanwhile the judgment in favor
to defendant / respondent represents 27.78 and judgment which dismissed both
parties‟ claim represents 5.55%.
68
Final Judgment (II)
Judgement for Executor
Judgement for Proprietor
No Deal
5.56
27.78
66.67
Figure 4.4: Judgment Comparison between Executor and Proprietor
From result as shown in Figure 4.4, it is clear that tendency for executor to
file the court case against proprietor after the delay dispute arose is much higher.
Between executor and proprietor, tendency for the judgment is more toward executor;
at the mean while, result also shows that judgments are drifted toward plaintiff /
appellant side.
69
4.3
Trend of the Dispute Resolution
Figure 4.5: The Trend of Dispute Resolution Arise Due To Delay in Project
Completion
As shown in Figure 4.5, the delay in project completion is commonly brought
to the consequences such as non-payment to the amount due, reluctant to release the
retention fund at the end of project, called for performance bond as proprietor try to
redeem their right to reimburse the cost of works left behind before executors. It is
also disputed in the cases that when the argument arise, parties tried to claim from
each other for the damages either in general, liquidated or un-liquidated form. Some
are disputed with statement that they have loss in the profit and contended their right
to claim for their loss.
When dispute arises, those with no other option will choose to resolve the
matter via settlement in court. Some of the process of dispute resolution from
70
selected cases might firstly go to the negotiation between the parties in which this
study not covered due to its informality. However, the process of Arbitration was
recorded as one of the consequences due to non-satisfaction of it awards, then
brought to the litigation proceeding of the selected cases.
The process of the litigation proceeding will be started from subordinate
courts depends on the civil suit volume. The ultimate court would be Federal Court
which it judgment would be final for cases in civil, criminal and constitutional matter.
Figure 4.6: Hierarchy of Malaysia Court System
4.4
Proposed Steps / Measures for Delay Disputes Avoidance
As derived from the selected cases, measures to avoid such dispute especially
those dealing with delay in project completion issues have been extracted from
Judge‟s judgment / findings and categorized into 3 stages namely, pre-construction,
during construction and upon completion.
71
4.4.1 Pre-Construction
Steps in pre-construction stage can be further classified / discussed into topics
as follow:
a) Understanding between Parties of Their Responsibility
Considerations of dispute avoidance have to be emphasized begin from the
stage as early as the before commencement of the projects. In this stage, the initial
idea is to understand the role and responsibility of respective parties before the
commencement of project whether is in the main contract or sub-contract work.
Parties have to make clear what will be their position and their right within the
project function as well as execution of their obligation according to the contract.
As per findings, Larut Matang Supermarket Sdn Bhd vs. Liew Fook Yung
[1995] 1 MLJ 375, the plaintiff was supposed to be responsible for obtaining the
approval drawings for the commencement of work, but the defendant, as a client,
without the plaintiff knowledge, obtained the approval and commenced the
construction by their own. Parties were in dispute of roles overtaking where the
defendant have acted unlawful which this suppose to be done after the proper
withdrawal of the plaintiff from the Contract.
This can be show as well from the case of Syarikat Soo Brothers
Construction vs. Gazfin Sdn Bhd Case ([1989] 1 MLJ 64) where the plaintiff has
made an improper move to threaten the defendant for the suspension of work; this
actually shown that parties in the case have no proper understanding between each
other for the delivery of the project.
While at Ley Boon Hee vs. Mohamed & Sons Construction Case ([1995]
MLJU 304), the statement made very clear to the clauses in the sub-contract between
the appellants and the respondent which obliged each party to render all necessary
assistance in making claims against employer. This clause, if complied, means the
cooperation between each party in all material time, ensure the success of the project,
hence avoiding the arisen of dispute.
72
The opinion from the interviewed industry practitioners had come to the
focus on the philosophy “know who better than know how” in the process of
obtaining contract. They suggest that many had learnt to know each other at the
preliminary stage of contract so they have their limit of acceptance and tolerance set
on the term of contract and should make necessary adjustment either adopt or omit
particular terms that they find are favor and can be accepted and agreed by both party
to preserve the relationship on each other.
b) Proper Site Handing Over and Possession
Another issue which always becomes a topic of argument before or upon the
work commencement is the possession of site. The proprietors are always the party
to be blamed on this issue. The executors have their right to obtain compensation if
the date of site possession has been delayed.
The Judgment from case Thamesa Designs Sdn Bhd & Ors vs. Kuching
Hotels Sdn Bhd Case ([1993] 3 MLJ 25) held that, “Here, the facts showed that the
employer handed over the site late which led to the delay on the part of the executor
to complete the works and therefore, it is patently clear that the employer should not
be entitled to claim for liquidated damages under the said contract, because by his
omission to give possession of the site in time …” The Proprietor in this case had
failed in their contend for the liquidated damages claim as the delay of work was
testified to be responsible by the improper site handing over to the executor. This
also apply in Sim Chio Huat vs. Wong Ted Fui [1983] 1 MLJ 151.
Proper recording especially for the dates and chorology of events of the site
handing over are the only best measure as agreed and recommended by the industry
practitioners in the executor aspect for the avoidance of the dispute arisen. On the
other way, intensive assessment on the site readiness at the initial stage of work was
set as a measure to be taken by the proprietor in which to minimize the possibility of
repudiation and argument when it caused the delay in completion of the project
undertaking.
73
c) Pre-Determinate the S.O. Responsibility in Specific Roles
Other than parties‟ responsibility, the roles of assigned person in-charged
which normally called as Superintendent Officer (S.O.) have to be defined
pertinently. With regard to the terms writing in the contract, the statement of roles
and responsibility of S.O. are always the imperative part in contract binding.
But, it was testified from the selected case in this study that, the decision of
S.O. has been challenged, as expressed in the Syarikat Soo Brothers Construction vs.
Gazfin Sdn Bhd Case ([1989] 1 MLJ 64) where the executor pleaded that the
architect (S.O.) acted partially and wrongly withheld certain certificate in respect of
the sums claimed by the executor.
In the case of Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya Sdn Bhd
Case ([1992] 1 MLJ 42), the proprietor themselves challenged the decision made by
architect who employed by them in granting the extension of time pursuant to the
contract. Though the architect was no doubt nominated by the proprietor and paid by
him, no one should doubt that the architect had to act professionally in accordance
with the contract.
It was in the opinion of the industry practitioners that the roles of
superintendent officer, either the architect or engineer, should be given full control
authorization for his execution of work; immediate instruction can be obtained in fast
way to expedite of work progress. But, this have to be provided that the so-called
superintendent officer is well trained and experienced enough to examine and assess
the proper means of the issue and conclude with sound decision.
d) Focus on Contract Preparation
Before the execution of work, one was reminded that the terms and clauses in
the contract can initiate a very significant impact to the future when the disputes arise.
Notwithstanding many know about this fact, but yet the dilemma of argument still
repeatedly occurred during the course of construction process.
74
Firstly, the adequate contract documents, work details, drawings and
specifications have to be ready and provided before commencement of work. One
should acknowledge their contractual obligation as articulated within the contract
documents. It was contended in the case of Ley Boon Hee vs. Mohamed & Sons
Construction Case ([1995] MLJU 304) where the dispute arose on some of the
claims of the executor including the costs incurred in re-spraying with protective
spray on the areas which the testing agent employed by the proprietor, deemed to be
not satisfactorily done in term of thickness. The claim was based on an express term
of the sub-contract in which it was the contractual obligation of the executor to
provide fire proofing spray. The argument was then dragged toward the end of
project and became one of the sights of non-performance from the executor side
which brought to the delay in project completion.
Other then contractual obligation, it was advisable by industry practitioners
that one should be conscious with the detailing of drawings or specifications as
numerous disputes arise due to non-compliance to the terms stated within the above
documents. Discussion between parties in regard to the terms and clauses should
reflect the actual requirement of the contract needs before it is bind for the execution.
The other issue with frequently debated and disputed in relation to contract
binding is bills of quantities. The variation works or change orders always created
the circumstance for prolonging the project‟s time. Case of Sim Chio Huat vs. Wong
Ted Fui Case ([1983] 1 MLJ 151) clearly expressed the issue discussed above;
indeed by ordering extra work to be done, for which the contract made no provision,
the proprietor must be held waived his right to rescind the agreement on account of
repudiation and also the right to treat himself as discharged there-from. Intensive
assessment of the bills of quantities to suite the work expectation is essential to
minimize the occurrence of variation works.
As per industry practitioner‟s comments, since the variation of works are
usually unavoidable due to the un-expectation nature of work in construction
industry, one to make sure the expected completion time is allowable to the extra
work that deemed to be executed. To do that, once the variation works take place, the
person in charge should be aware of the contingency to re-assess the completion date,
75
either it have to be prolonged or shorted to accommodate the additional new scope of
work. Through that efforts, dispute due to delay in completion can be minimized.
As mentioned above, re-assessment of the time of project completion is a
must for the avoidance of conflict upon the completion where party deemed to claim
the damages from opposition party if delay takes place especially on the issue of
liquidated damages. Conditions of damages‟ claim especial on the issue of the
motive of action on damages have to be assessed before the issues arise. This can be
guided by the statement of the law in Hudson's Building and Engineering Contracts,
10th ed., at p. 624, which is as follows:
if the date in the contract has for some such reason ceased to be the proper
date for the completion of the works, and no contractual provision exists for
the substitution of a new date, there is in such a case no date from which
liquidated damages can run and the right to liquidated damages will have
gone
Provision for extension of time is another item that needs indeed evaluation
before commencement of work. Evaluation for the time extension terms have to
cover all aspect of works to ensure the adequately to accommodate the all possible
events.
It was a norm in this industry for the existence of variation work and it is
closely attached with the time required to accommodate the additional task. In Sim
Chio Huat vs. Wong Ted Fui Case ([1983] 1 MLJ 151), the agreement contained
neither provision for extension of the delivery period nor any provision as to
alterations and additional works. But the period of work was allowed to be prolonged
by the proprietor as regard to the additional work dictated by them.
The court held that, in cases where an agreement contains no clause for
extension of time for completion, the acts of prevention by the employer whether
authorized by the contract or whether in breach of it or whether the prevention is a
cause of part or of the whole of the delay invalidate the liquidated damages clause
76
because by such acts time becomes at large and consequently there is no date from
which damages could run and therefore no damages could be claimed.
Moreover, the intense considerations also need to be presented against the
terms of dispute resolution approaches. One cannot disregard the possibility of
dispute occurrence by taking one advance step to review the proper dispute
resolution approaches before it happened. What we conclude from Thamesa Designs
Sdn Bhd & Ors vs. Kuching Hotels Sdn Bhd Case ([1993] 3 MLJ 25), the parties
have waived their rights to go to arbitration before the litigation proceeding and
contended by raised an issue in the face of the arbitration clause in the said contract
that court had no jurisdiction to hear the matter; the parties to the proceedings before
the learnt judge had never questioned its jurisdiction and had, by their conduct,
waived their rights to go to arbitration. Advice from the industry practitioners that
parties should understand their right expressed in the contract before approaching the
dispute resolution method, to minimize further arising of issues.
4.4.2 During Construction
Furthermore, measures can also be acquired during the course of construction
in the effort to avoid the dispute occurrence especially for those due to delay issue.
a) Communicate between Parties
First and foremost, the correct ways to liaison with the personnel at
construction site is one of the inevitably skill required in coordination work. It has to
be sure that required information is delivered to correct person in the right manner to
avoid any late transmission of information which might cause delay in work progress.
Industry practitioners quoted that above issue is actually will be fall to the
responsibility of the parties‟ management in the arrangement of site organization.
The authorization of power to decide has to be fairly conveyed to the experienced
personnel for fast execution of work.
77
b) Cooperation and Tolerance between Parties
Apparently, other than communication, the cooperation and tolerance
between parties also take part during the course of construction to minimize the
impediment to the work progress as well as dispute occurrence.
Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd Case ([1995] 1 MLJ 214)
clearly testified that due to the non-cooperation between parties, dispute arose. The
executor had not complied with the notices issued by the proprietor which later cause
the delay by the executor. As the result, the determination of the contract by the
proprietor take place and the court held that was justified.
In this scenario, the practitioners suggested that the relationship between
parties have to be preserved no matter since how long the relationship had
established. Timely work delivery should mean the some to the success of the project
which are actually deserved by all involved parties.
c) Reasonable Time Frame for Notice
Tolerance denotes the understanding between parties in the execution of work.
The time frame for work especially the variation work as well as change of works‟
sequences should be clearly dictated to avoid dispute occurrence when extra time
needed for the implementation. Reasonable time frame for notice should be
considered, given the opportunity for parties to ensure that work can be altered or
accomplish as required by notice given. It also applied to the notice for the
termination of work; reasonable time frame and brief statement for the notice of
contract termination should be given, extending the time frame for party to identify
the cause of termination, minimize the conflict between parties and thus, the dispute
occurrence.
As read in the case of Haji Hasnan vs. Tan Ah Kian [1963] 1 MLJ 175, the
Judge has commented that “the appellant repudiated the contract before the work
was completed without giving notice to the respondent to complete by a certain
78
date, … engaged another contractor to complete the work”. Even it was only about
the consideration of the basic of quantum meruit, but by given the reasonable notice
for the termination would really minimize the appearance of disputes.
d) Records Keeping
The most significant part in the avoidance of dispute is actually the record
keeping for all the important facts that likely to be debated when dispute arise, such
as chronology of happened events, invoice of payment, letters of correspondents and
notification, minutes of meeting, instruction received, progress reporting and etc.
As held in the case of Sim Chio Huat vs. Wong Ted Fui Case ([1983] 1 MLJ
151), because there is unchallenged evidence given by the executor that the executor
was unable to proceed with the given extra work until the approval of the
authorization. With adequate evidence or so-called record keeping, dispute can be
judiciously avoided. In the way where dispute cannot be avoided, this could allow
the decision of judgment to be made more in more wisely manner.
In the opinion of the industry practitioners, those records keeping are always
become the source of reference to tackle the dispute; as per case of Ley Boon Hee vs.
Mohamed & Sons Construction Case ([1995] MLJU 304), the court used the minutes
of meeting as reference in the judgment to justify the appearance of dispute; making
the record keeping, one of the essential item in the resolution of the dispute
settlement.
e) Time is of the Essence of the Contract
The proprietor has to be alert on the „time of of the essence of the contract‟
issue. Once the time for the completion was made to be essence and fixed in the
contract, parties were actually bonded to the contract to make sure timely delivery of
project. But that will be adverse side for the proprietor where they have to make sure
their conducts during the course of construction may not waive them from making
time become not essence.
79
Mohamed Azmi J in Sharikat Eastern Plastics Industry v Sharikat Lam Seng
Trading [1972] 1 MLJ 21 applied Webb v Hughes (1870) LR 10 Eq 281 at p 286,
where Sir R Malins VC said:
But if time be made of the essence of the contract, that may be waived by the
conduct of the purchaser; and if the time is once allowed to pass, and the
parties go on negotiating for completion of the purchase, then time is no
longer of the essence of the contract. But, on the other hand, it must be borne
in mind that a purchaser is not bound to wait an indefinite time; and if he
finds, while the negotiations are going on, that a long time will elapse before
the contract can be completed, he may in a reasonable manner give notice to
the vendor, and fix a period at which the business is to be terminated.
The above dictum was also approved by Raja Azlan Shah J (as His Majesty
then was) in Wong Kup Sing v Jeram Rubber Estates Ltd [1969] 1 MLJ 245 where
his Lordship held that 'once time for completion was allowed to pass and the parties
went on negotiating time was not longer of the essence of the contract ...'.
Also in Halsbury's Laws of England, 4th ed. para 538, page 370, it was read
as “Failure by the appellant to fulfill this condition would entitle the respondent to
have an option of treating the agreement either (a) as having been repudiated and
dismissing the appellant; or (b) as still continuing.
In other words, by allowing the time to pass with proprietor conduct such as
late site possession, ordering extra work, etc, proprietor will then have no right to
probe if the delay of project occurred, since the time of completion have been set to
be at large.
f) Proper Planning and Coordination of Works.
Other than precaution to the fault that might be caused by proprietor as
discussed above, there are circumstances that the default is from the executor side.
The industry practitioners hinted that most of the work schedule is actually within
executor control, they can do anything to make things possible; faster or slower the
80
progress of works are depended on the resources allocation as well as the planning
and coordination work from the executor.
What actually happened to the case of Ley Boon Hee vs. Mohamed & Sons
Construction Case ([1995] MLJU 304) is that, during the course of construction, the
executor was reminded about the delayed in the progress, but no appropriate action
taken to overcome the issue and thus, caused the delay at the end of project. Dispute
arose; the executor was trying to shift the blame else-where. It was all about proper
planning and coordination of works, which if in proper manner, delay of work can be
avoided as well as dispute in relation to the delay.
g) Payments Sensitivity
The payment sensitivity especially in the process of making progress
payments due to the executor for the work done is the event that needed more taking
care and concern for the dispute avoidance.
In both cases of Shen Yuan Pai vs. Dato Wee Hood Teck & Ors [1976] 1 MLJ
16 and Kokomewah Sdn Bhd vs. Desa Hatchery Sdn Bhd Case ([1995] 1 MLJ 214),
the executor contended that they had not received full or partial payment from the
proprietor; the dispute arose and they have commenced an action against the
proprietors.
This has been testified by the industry practitioners that payment issue is
always causing conflict between parties; most of the conflict or disputes between
parties in the construction industry are mainly caused by the break down in the
process of negotiation in relation to the payments. To avoid the dispute, one to be
ensuring that negotiation in relation to payment issue is carryout in proper manner.
81
4.4.3 Upon Completion of Construction
Two more measures for delay dispute avoidance which will be discussed are
related to the non-completion certificate and the assessment on the final certificate
and claim for work done.
a) Certificate of Non-Completion
Upon the completion of construction works, it is duty for superintendent
officer or architect to assess on the degree of the work completion and issue the
certificate of non-completion particularly when delay dispute take place.
As held in case of Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching
Technology Sdn Bhd [2009] MLJU 0049, the court stated that: It must be noted that
the respondent failed to produce the certificate of non-completion at the trial, when it
is clear that the said certificate is essential and is a condition precedent before the
LAD can be deducted. The court emphasized the need of non-completion certificate
as verification for the claim of liquidated damages by proprietor. Meanwhile, at the
case of Syarikat Pembinaan Binaken vs Perbadanan Pembangunan Bandar [1998]
MLJU 124, the court held that the arbitrator erred in imposing liquidated and
ascertained damages on the Applicant when there was no certificate on noncompletion. Again, the court dismissed the claim for liquidated damages with the
absent of non-completion certificate.
Industry practitioners advised that it is necessary to make sure the certificate
of non-completion is issued upon the completion date if the progress of work is not
satisfactory or delayed to the avoidance of dispute.
b) Assessment on Final Certificate and Claim for Work Done.
It is always apparent that most of the proprietor will withhold the payment for
executor due to their non-performance in work. This course of action could really
strain the relation between parties and increase the possibility of dispute occurrence.
82
As read in the case of Syarikat Tan Kim Beng & Rakan-Rakan vs. Pulai Jaya
Sdn Bhd Case ([1992] 1 MLJ 42), the action to the litigation are actually caused by
the improper withhold of the final certified payment as proprietor deemed to be
payable as liquidated charges from the delay caused by executor. Some situation
applied to the case of Thamesa Designs Sdn Bhd & Ors vs. Kuching Hotels Sdn Bhd
Case ([1993] 3 MLJ 25), the final payment as authorized as liquidated damages by
themselves has held to be invalid and was not binding on the parties.
Recommendation from the industry practitioner, that tolerance between
parties could be the only mode to avoid the conflict in such situation.
4.5
Summary
This chapter discusses the analysis of the information gathered. A content
analysis is made as each cases possesses different characteristic, hence these not
uniform data have brought to the hurdle and made it impossible to have statistical
analysis.
The analysis of 18 selected cases shows that even happened to be various
causes of delay disputes, the trend of the dispute settlement is clearly cited through
the summarized output from the analysis.
The proprietor which is considered to have sound basic in financial
background is at the adverse side when involve in the settlement in litigation
proceeding. Analysis shows that most of the court suit was filed by the executors and
they managed to obtain high percentage of successful rate through the debate on the
disputes. High successful rate in court suit also goes to plaintiffs or appellants who
are mainly take parts by executors. Furthermore, the analysis of the cases also show
that most of the causes of delay dispute debated in the court suit is mainly
responsible by the proprietors, such as failure to give timely order for work, ordering
excessive extra works, improper site preparation / possession, failure to make timely
payment to contractor, etc.
83
From the analysis, suggestion for the steps of delay dispute avoidance is
categorized which set up from the review of the testified statement in the selected
cases; it is separated into 3 stages, namely pre-construction, during construction and
upon completion of construction. All steps are well described with its example action
and consequences from respective case.
CHAPTER 5
RECOMMENDATION AND CONCLUSION
5.1
Introduction
This chapter is the final session that summarized the findings of the study
according to the research objective. It also contains the problem encountered during
the research as well as recommendation forwarded for future research.
5.2
Summary of Findings
The first finding from this research is deliberated through the analysis of the
causes of delay dispute from the selected cases. The causes of delay which is default
by the proprietor are found to be the causes of delay which entitled the executor to
claim for both extension of time and compensation, namely failure to give timely
order for works, failure to coordinate prime / nominated contractors, excessive
change order, improper site preparation, failure to make timely payment to contractor,
defective drawings or specification, and suspension / stoppage.
Whenever the facts of delay are testified to be responsible from the abovementioned causes, proprietors become the party to be blamed; no damages could be
claimed from the executor. On the other hand, the executors are entitled to claim for
their damages and / or extension of time, at least to the extent of quantum meruit.
Above types of delay causes are categorized as excusable delay with compensation.
85
Another two causes of the delay dispute, namely bureaucratic red tape and
weather, acts of Gods and labor problems which are found in the analysis are
categorized in the excusable delay without compensation. Unless it cannot be
testified, it should be deemed to allow for the claim of extension of time by the
executor. This type of delay is dealing with abnormal occurrence of events which
cannot be predicted by both the proprietor and the executor. The weather in this
discussion is referred to the extreme change in its behavior compared to normal, and
it is excusable; normal weather occasion which can be easily predicted felled into
category of non-excusable even if it causes the delay.
The last cause of delay obtained from the analysis is the default by the
executor. This type of delay is categorized as non-excusable delay, and from this
case, proprietors is entitled to claim for the liquidated claim as per agreed terms in
this contract. The executor should bare full responsibility if testified that the causes
of delay are felled into this category.
Unlike alternative disputes resolution like mediation and arbitration, dispute
settlement through litigation proceeding is actually cost and time consuming. As it
mostly involve with the superior courts, namely High Courts, Courts of Appeal and
Federal Court, it can be expected that the volume for the claim in respective cases is
high and it reflects to its processing cost which should be higher as well. When talk
about time consuming, it is understood that High Court could be continue the hearing
from sub-ordinate court as it dragged further. Appeal cases also could be preceded in
any of the superior court as it steps upward in the hierarchy of Malaysia courts
system before the Federal Courts. In this analysis, some cases are brought from the
arbitration, and also some are from the appeal process when it stepped further with
their disagreement to the award. These make litigation proceeding become more
complex and lengthen the time usage.
Addressing the second objective of the study, findings as discussed above
have brought to the reason on how and why the court suits from the selected cases
are filed. Even it is cost and time consuming, analysis shows that the trend of the
delay dispute resolution between parties became worsen when it involve cost;
especially for the executors who chose litigation proceeding as their dispute
86
settlement mechanism given being that most of the executors are in the attempt to
claim back the damages cost which are actually greater in terms of cost volume
compare with the processing cost for litigation proceeding.
Since the executors are on the weaker side in terms of financial supports,
when disputes occurred, especially those incurred un-settled damages cost; there are
more tendencies from the executor side to look for relief in the dispute settlement
and litigation become the only option for them to consider. The executors obtained
their belief on litigation proceeding due to its formality and judgment independency.
These facts also brought to the idea on why the tendency of the judgments is toward
the executor side.
When dispute occurred, if the default is caused by the executors who have
less control over the financial aspect of the project, the tendency of the dispute
settlement will be more on the settlement between parties by more negotiable or informal method either on win-win basic or win-lost basic which will be always
favorable to the proprietors. Otherwise, if it is found that the default is caused by the
proprietors, negotiable or in-formal method between parties for dispute settlement
become ineffectual, hence litigation proceeding is chosen as the only option for the
executor to reimburse their claim on damages. These are well supported by the
analysis which shows that the final judgment in the selected cases is more toward the
award to the executors or plaintiff / appellant side.
Finally, this project also enables the extraction of delay dispute avoidance
measures via the testified judgment from the selected cases. This reflects the
achievement of third objectives of the study. Steps of the avoidance were found to be
involved in all stages along the course of construction; before, during and upon
completion. More concerns are required on the contract documents preparation as
well as the attitude or behavior of the involved parties which it, in fact, formed as
basic references for the resolution of disputes.
87
5.3
Conclusion
Based on the above findings, it clearly testified that the delay-related dispute
arise between industry players due to delay in project undertaking are generally
pertain to the circumstances whether they are losing or gaining in terms of money
and cents, such as loss of profit, damages claim, non-payment reimbursement, noncertified on work done, etc in which all involved financial conflict within parties. To
serve the purpose of „business based‟ nature of the industry, it is difficult for one to
tolerance if payments or claims could not be accomplished. Thus, litigation
proceeding became the only method to the dispute resolution when perception
between parties are no more applicable.
5.4
Recommendation
It was recommended that such dispute settlement via litigation proceeding
could be minimized by taking further precaution when dealing with financial conflict
between parties. Sense of consciousness preservation in works between parties could
also be the best idea to avoid the said dispute to be occurred.
88
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Sorensen v. Robert N. Ewing, 8 Ariz. App. 540, 448 P.2d 114 (1968)
91
APPENDICES
Samples of selected case report:
A) Haji Hasnan vs. Tan Ah Kian ([1963] 1 MLJ 175)
B) Syarikat Soo Brothers Construction vs. Gazfin Sdn Bhd ([1989] 1 MLJ 64)
C) Johor Bahru Pyramid Sdn Bhd vs. Sinometal Punching Technology Sdn Bhd
([2009] MLJU 0049)
92
APPENDIX - A
1 MLJ 175, *; [1963] 1 MLJ 175
© 2003 LexisNexis Asia (a division of Reed Elsevier (S) Pte Ltd)
The Malayan Law Journal
HAJI HASNAN V TAN AH KIAN
[1963] 1 MLJ 175
CIVIL APPEAL NO 57 OF 1962
CA KL
DECIDED-DATE-1: 28 FEBRUARY 1963
THOMSON CJ, HILL AND BARAKBAH JJA
CATCHWORDS:
Contract - Completion of road works by specified date - Non-completion Termination of contract - Whether time of the essence
Contrast - Breach of contract - Damages - Quantum meruit
HEADNOTES:
The appellant having obtained a contract to construct roads sub-contracted with the
respondent for its performance. The respondent agreed to complete the whole work
on or before May 30, 1960. On May 6, 1960 the respondent commenced work and on
May 27, 1960 the appellant inspected the work and found it had not been properly
done. On May 30, 1960 the appellant terminated the contract and entered into a fresh
contract with another person for the completion of the work. The respondent, on June
4, 1960 requested an extension of time to complete the work and on it not being
granted brought an action for work done and materials supplied. Judgment having
been entered for the respondent as claimed, the appellant appealed:
Held:
(1) the nature of the contract or of its subject matter was such that no
inference could be drawn that time was of the essence;
(2) accordingly, the appellant was in breach of his contract and the
respondent was entitled to recover on the basis of quantum meruit.
Decision of Gill J ([1962] MLJ 400) affirmed.
Cases referred to
Stickney v Keeble [1915] AC 386
Yeow Kim Pong Realty Ltd v Ng Kim Pong [1962] MLJ 118
93
H Dakin & Co Ltd v Lee [1916] 1 KB 566
Planche v Colburn (1831) 8 Bing 14
Smith Construction Co Ltd v Phit Kirivatna [1955] MLJ 8
Sumpter v Hedges [1898] 1 QB 673
CIVIL APPEAL
Dato RPS Rajasooria for the appellant.
Robert KC Hoh for the respondent.
ACTION:
CIVIL APPEAL
LAWYERS: Dato RPS Rajasooria for the appellant.
Robert KC Hoh for the respondent.
JUDGMENTBY: BARAKBAH JA
(with whom Thomson C.J. and Hill J.A. agreed): The defendant (appellant on this
appeal) obtained a contract from the District Officer, Kuala Selangor, to supply,
transport, spread and level, etc. good quality laterite from Batang Berjuntai Quarry
for the making of certain stretches of roads in the Tanjong Karang [*176] area and
at Pasir Panjang in the District of Kuala Selangor. He then entered into an agreement
on 6th May, 1960 (Ex. P 1) with the plaintiff (respondent on this appeal) who
undertook to carry out this piece of work and to complete the whole of it within the
30th day of May, 1960.
The respondent commenced work on 6th May, 1960. On 27th of May, appellant
inspected the work with the Assistant District Officer, Tanjong Karang and found
that it had not been properly done.
On 30th May, he sent a letter (Ex. P 2) to the respondent terminating the contract and
on the same day he entered into an agreement with one Kathigesu to complete the
work.
On 4th of June, the respondent sent a reply asking for a further ten days in which to
complete the work adding that if this was not agreed to, legal proceedings would be
commenced against the appellant without further notice. As extension of time was
not granted, the respondent filed an action in Court for damages for breach of
contract, alternatively for a sum of$ 4,079.98 for work done and material supplied.
On 22nd September, 1962 the trial Judge entered judgment for the plaintiff in the
sum of $ 4,079.98 with 6% interest per annum from the date of the judgment to the
94
date of satisfaction and costs. The appellant was dissatisfied with the decision, hence
this appeal.
There were several grounds of appeal but the main issues were as to whether time
was of the essence of the contract and whether the plaintiff was entitled under the
doctrine of quantum meruit.
For the purpose of determining the issues, it is well to state the relevant parts of the
agreement (Ex. P.1).
"(3) WHEREAS the Contractor is the lawful person and undertaker who
has so undertaken to carry out the undermentioned road work for
the District Officer, Kuala Selangor, by respective works indents
and particulars shown below.
Supplying, transporting, spreading and levelling, etc. of good quality
laterite from Batang Berjuntai Quarry on roads; such work to be in
accordance to the specified requirements of the Government on
roads:--(as under)
(a) At Sungei Leman, Tanjong Karang, 10 chains long by 8 feet wide by
4 inches thick ... Vide Indent 18/60
(b) At Sungei Tinggi Kiri, Tanjong Karang, 40 chains long by 8 feet
wide by 4 inches thick ... Vide Indent 18/60
(c) Batu 23, Pasir Panjang, 30 chains long by 8 feet wide by 4 inches
thick ... Vide Indent 19/60
(3) AND WHEREAS the Contractor is agreeing to sub-let his contract
work on above mentioned road work to the Sub-Contractor, AND
WHEREAS the Sub-Contractor doth hereby agree and undertake to
carry out the above works for the Contractor, the conditions and
terms attached to and relating to the said work, to be so
accomplished by the Sub-Contractor will be as follows:-(4) a The Sub-Contractor:-a. x x x x
b. WILL commence work on or about Sixth (6th) day of May, 1960, and
'start first on item (a) above-- Sungei Leman road; (b) then afterwards
or at the same time commence work on Sungei Tinggi Kiri road work, (c)
and for the third he will do the Batu 23, Pasir Panjang road work.
c. WILL complete the whole work comprised by the said items and the
corresponding works Indents within the 90th day of May, 1960.
d. x x x x
e. WILL receive payment from the Contractor on date of completion of
each work; subject to the quality of work so carried out is in
accordance with the requirements specified in the Indents, and accepted
without dispute by the Government.
(5) THE SUB-CONTRACTOR will be provided with service of an Excavator
at the Batang Berjuntai Quarry, to do the cutting and loading
into Sub-Contractot's lorries, of all the required laterite,
without delay caused in time, or other unjustified reasons, AND
the cost of this item will be borne by the CONTRACTOR.
ANY neglect or delay caused under this heading by the CONTRACTOR will
not render the SUB-CONTRACTOR for any liability, and that he will not
be made to suffer for the neglect of the CONTRACTOR.
95
(6) Special Conditions Applicable to Both Parties hereto
1. PAYMENT TO SUB-CONTRACTOR subject to his carrying out all works
as mentioned and narrated in this Agreement.
A. BREACH of contract agreed upon herein by the CONTRACTOR, will render
the SUB-CONTRACTOR eligible and entitled to report this matter to the
Government Authorities, if necessary, and claim payment for his work
direct from the Government.
TO THIS agreement, the CONTRACTOR hereby gives his full consent and
promise, which he shall not revoke under any reason.
B. Rate of Payment to the Sub-Contractor:-Sungei Leman, Tanjong Karang ... 10 chains roadwork [commat] $ 68
(Dollars Sixty-eight only) per chain length Sungei Tinggi Kiri, Tanjong
Karang ... 40 chains roadwork [commat] $ 55 (Dollars fifty-five
only) per chain length Batu 23, Pasir Panjang, 30 chainslength
[commat] $ 80 (Dollars Eighty only) per chain."
It was contended by the learned counsel for the appellant that as the agreement
stipulated that the whole work should be completed within the 30th day of May,
1960, time should therefore be regarded as of the essence of the contract and failure
to comply with it would entitle the appellant to repudiate the contract.
In my opinion the learned trial Judge considered this point carefully. He referred to
the three general principles as to time being the essence of the contract. Firstly, time
is of the essence of the contract where the parties expressly stipulate in the contract
that it shall be so; secondly, time is of the essence of the contract where it was not
originally stated to be so, but has been made so by one party by giving reasonable
notice to the other, who has failed to perform the contract with sufficient promptitude;
thirdly, time is of the essence of the contract where from the nature of the contract or
its subject matter time must be taken to be of the essence of the agreement.
The learned trial Judge went on to say in his judgment: "Applying the above
principles of law to the agreement in this case, I have no hesitation in saying that
time was not of the [*177] essence of the contract ... The nature of the contract or of
its subject matter was such that it would be wrong to draw an inference that time was
of the essence, nor is there any evidence of any attendant or surrounding
circumstances from which it can be gathered that it was so. If there were any
evidence that it was within the contemplation of the parties that the roads were
required for a specific purpose and it was imperative that they should be ready by
30th May, 1960, it would be logical to draw an inference in favour of the defendant".
With this view of the learned Judge I respectfully agree. From the evidence of the
Assistant District Officer there was no urgency for the completion of the road. On
receipt of letter Ex. P 2, respondent sent a letter to the appellant asking for another
ten days to complete the work, the delay for the completion being due to high tides
and rainy weather. No extension of time was granted and no notice was given to the
respondent to complete by a certain date. Had notice been given to the respondent to
complete by a certain date then time could have been of the essence of the contract.
See Stickney v Keeble [1915] AC 386; Yeow Kim Pong Realty Ltd v Ng Kim Pong
[1962] MLJ 118.
Regarding the doctrine of quantum meruit it was contended by the counsel for the
96
appellant that no claim could be made on it. He stated that the respondent would not
be entitled to more than the contract price of $ 5,280 less the sum of $ 4,750
expended by respondent to complete the work, i.e. $ 530 only. He quoted the case of
H Dakin & Co Ltd v Lee [1916] 1 KB 566 in which there was a contract to do a
considerable amount of work to the defendant's house. What the respondent had done
was to perform and complete the work which they had contracted to do, but they had
done some part of it insufficiently and badly and it was held that the respondent were
entitled to be paid but the appellant could deduct such an amount as was sufficient to
put that insufficiently done work into the condition in which it ought to have been
according to the contract.
The learned Judge came to the conclusion that the respondent's claim should be
decided on the basis of quantum meruit. He referred to the case of Planche v Colburn
(1831) 8 Bing 14 where the appellant engaged plaintiff to write a treatise for a
periodical publication. Plaintiff commenced the treatise, but before he had completed
it, the defendants abandoned the periodical publication. Held, that respondent might
sue for compensation, without tendering or delivering the treatise. I respectfully
agree with the trial Judge's views as expressed in his judgment. In Smith
Construction Co Ltd v Phit Kirivatna [1955] MLJ 8 Spenser Wilkinson J. referred to
the unreported case of Lysaght v. Pearson which was referred to in Sumpter v
Hedges [1898] 1 QB 673. He quoted the words of A. L. Smith L.J.:-"There the plaintiff had contracted to erect on the defendant's land
two corrugated iron roofs. When he had completed one of them, he does
not seem to have said that he abandoned the contract, but merely that
he would not go on unless the defendant paid him for what he had
already done. The defendant thereupon proceeded to erect for himself
the second roof. The Court of Appeal held that there was in that case
something from which a new contract might be inferred to pay for the
work done by the plaintiff."
The present case is distinguished from Dakin's case in that the appellant repudiated
the contract before the work was completed without giving notice to the respondent
to complete by a certain date. Indeed he immediately engaged another contractor to
complete the work. The respondent applied for an extension of time to complete
which was not granted. From all the circumstances, I am of opinion that there must in
this case be an implied contract on the part of the appellant to pay for the work done
and therefore the respondent is entitled to recover the full amount of the work and
labour done and material supplied. In his judgment the trial Judge has carefully
considered the case in every aspect and in my view he has come to the right
conclusion. I would therefore dismiss the appeal with costs.
Appeal dismissed.
SOLICITORS:
Solicitors: RPS Rajasooria; Eugene Lye & Hoh.
LOAD-DATE: June 3, 2003
97
APPENDIX - B
1 MLJ 64, *; [1989] 1 MLJ 64
© 2003 LexisNexis Asia (a division of Reed Elsevier (S) Pte Ltd)
The Malayan Law Journal
SYARIKAT SOO BROTHERS CONSTRUCTION V GAZFIN SDN BHD
[1989] 1 MLJ 64
CIVIL SUIT NOS 116 OF 1985 AND 24-89-86
HIGH COURT (IPOH)
DECIDED-DATE-1: 23 APRIL 1988
ABDUL MALEK J
CATCHWORDS:
Contract - Building contract - Claim for amount due on certificate of architect Delay in completion - Claim for damages - Whether time essence of contract
HEADNOTES:
In this case the plaintiff claimed the sum of $ 145,456.19 being the money due on a
certificate issued by the architect on a building contract. The defendant did not
dispute the amount claimed but stated that as there was delay in completion, it was
entitled to damages. It was not disputed in this case that the written agreement was
signed three months after the purported date of completion and that the defendant
had delayed in making payments resulting in the plaintiff threatening to stop work.
Held, allowing the application: On the facts and on the authorities cited, time was no
longer of the essence of the contract and the defendant was not entitled to liquidated
and ascertained damages as the court was not in a position to ascertain when the
claim for damages should commence.
98
Cases referred to
Yeow Kim Pong Realry Ltd v Ng Kim Pong [1962] MLJ 118
Sire Chio Huat v Wang Ted Fui [1983] 1 MLJ 151
Miss Ong Geok Lan for the plaintiff.
Kamaluddin Maamor for the defendant.
LAWYERS: Miss Ong Geok Lan for the plaintiff.
Kamaluddin Maamor for the defendant.
JUDGMENTBY: ABDUL MALEK J
In Civil Suit No 116/85 the plaintiff is claiming from the defendant the sum of
$ 145,456.19 [*65] being the money due on a certificate dated 30 October 1984
issued by the defendant's architect pursuant to a contract made in writing between the
plaintiff and the defendant on 18 April 1983 by which agreement the defendant had
agreed to pay the plaintiff within 14 days from the date of presentation of the
certificate by the defendant's architect. In addition, the plaintiff had also asked for
interest at 8% from 30 October 1984 to the date of realization and costs. In Civil Suit
No 24-89-86, the plaintiff is suing the defendant for $ 27,159.70 being the money
due on a similar certificate dated 15 October 1985, interest at the rate of 8% from 15
October 1985 and costs.
In Civil Suit No 116/85, the defendant does not dispute the agreement dated 18 April
1983 and the demand made for the sum claimed but contends that the plaintiff had
completed the erection of the seven units of double-storey shophouses, 63 units of
double-storey terrace houses and two units of double-storey semi-detached houses
99
only on 30 August 1984 when by the agreement they should have done so on 18
January 1983. By reason of the delay, the defendant maintained that by virtue of cl
22 of the said agreement, they were entitled to the liquidated and ascertained
damages which they particularized in their statement of defence, the total of which
came to$ 296,414 for which they counterclaimed.
In their reply and defence to the counterclaim, the plaintiff agreed with the
completion date but averred that they had regularly and diligently proceeded with the
said works and any delay was caused solely by the defendant which had failed to
make payments to the plaintiff for the said works which had been certified to be
completed within 14 days from the presentation of the certificate of payment to the
defendant. The plaintiff accordingly detailed the particulars of the delayed dates of
payments. Further and in the alternative, the plaintiff pleaded that the architect acted
partially and wrongly withheld certain certificates in respect of the sums claimed by
the plaintiff. The plaintiff also stated that they were not liable for any damage, if any,
sustained by the defendant.
Basically a similar statement of defence, set-off and counterclaim and reply and
defence to counterclaim were fried in Civil Suit No 24-89-86.
Due to time constraints despite an earlier order for an early hearing, these two
consolidated cases could not go on the first dates of hearing, that is, 21-22 January
1988 and they were duly adjourned to 11 February 1988 whereupon counsel for both
parties informed the court that since all the three bundles of documents were agreed
upon and marked accordingly as AB1, AB2 and AB3, they were not calling any
witnesses and were agreeable to their matters being decided by way of their written
submissions only which by consent were to be submitted by learned counsel for the
plaintiff by 29 February 1988 (later on application extended to 7 March 1988) and by
learned counsel for the defendant by 15 March 1988.
In their written submissions, both counsel agreed that the plaintiff's claim of
$ 172,615.89 was admitted by the defendant. The only issue was whether the
defendant was entitled to the counterclaim amounting to$ 296,414.
100
Learned counsel for the plaintiff submitted that the facts were not actually in dispute.
As stated in the agreement between the parties dated 18 April 1983, the plaintiff had
agreed to erect and complete seven units of double-storey shophouses, 63 units of
double-storey terrace houses and two units of double-storey semi-detached houses
for the defendant. She specifically referred to cll 21, 22, 25, 26 and 30, and the
appendix to the agreement.
Clause 21 states that on the date of possession, which was 4 January 1982 according
to the appendix, possession of the site was to be given to the plaintiff who shall begin
and regularly and diligently proceed with the works and complete the same before
the date of completion, which was 18 January 1983 according to the appendix,
subject to extension of time as provided in cll 23 and 32(1)(c) of the agreement.
Clause 22 provides that if the plaintiff fails to complete the works by the date of
completion or within any extended time under cl 23 or 32(1)(c) and the architect
certifies in writing that in his opinion the same ought reasonably so to have been
completed then the plaintiff shall pay or allow to the defendant a sum calculated at
the rate stated in the appendix as liquidated and ascertained damages for the period
during which the works shall so remain or have remained incomplete and the
defendant may deduct such sum from any moneys due or to become due to the
plaintiff upon this contract.
Clause 25 specifies the situations when the defendant can terminate the employment
of the plaintiff, amongst them, if the plaintiff without reasonable cause wholly
suspends the carrying out of the works before the completion thereof, if the plaintiff
fails to proceed diligently with the works, if the plaintiff refuses or persistently
neglects to comply with a written notice from the architect requiring him to remove
defective work or improper materials or goods materially affecting the works, or if
the plaintiff fails to comply with cl 17 relating to assignment and subletting.
Similarly, cl 26 details the instances when the plaintiff can terminate his employment.
These include when the defendant does not pay to the plaintiff the amount due on
any certificate within the period for honouring certificates named in the appendix, if
the defendant interferes with or obstructs the issue of any certificate due under this
101
contract, where the work is suspended due to force majeure, civil commotion, loss or
damage occasioned by the contingencies referred in cll 20A and 20B [*66] and
delay in others engaged by the defendant in executing work not forming part of this
contract and where the defendant becomes bankrupt.
Clause 30 states that during the period of the interim certificate named in the
appendix, the architect shall issue a certificate stating the amount due to the plaintiff
from the defendant, and the plaintiff shall on presenting any such certificate to the
defendant be entitled to payment therefor within the period for honouring certificates
named in the appendix.
Learned counsel for the plaintiff submitted that since the defendant had admitted the
plaintiff's claim of $ 172,615.89, the only issue to be decided by the court is whether
the defendant is entitled to damages for the delay in the completion of the works as
raised in the defendant's counterclaim. She contended that they were not so entitled
as there had been a waiver and estoppel on the part of the defendant.
She conceded that the 63 units of double-storey terrace houses were completed on 24
August 1983 and the seven units of double-storey shophouses and two units of
double-storey semi-detached houses were completed on 30 April 1984 whereas the
date of completion was stated to be 18 January 1983. However, she argued that the
defendant had by its conduct allowed the date of completion to pass. Firstly, the
agreement itself was only signed on 18 April 1983 some three months after the
purported date of completion stated therein. She also listed out the details of all the
defendant's delayed payments. They had therefore not honoured the certificates of
payments within the stipulated time and were in breach of the agreement.
She had also listed out the several times they had threatened the defendant by letter
as regards the stoppage of the work because of late payments. The defendant did not
at any time object to the stoppage and had subsequently paid the amounts due. The
defendant and the architect had also never given notice to change the date of
completion thereby accepting the fact that the said date of completion had passed.
Learned counsel for the plaintiff also submitted that when the plaintiff had earlier
102
filed a writ of summons against the defendant for recovery of the ninth and tenth
payments, the defendant had allowed judgment in default to be entered against them
and subsequently paid the judgment sum, interest and costs. They never raised the
issue of delay in completion even though, as in this case, it has since passed. In view
of all this, time has ceased to be the essence of the contract and in consequence of the
defendant's waiver as to the date of completion, there is no date to ascertain from
when any damages could be claimed which means that no damages could be claimed.
Learned counsel for the defendant does not dispute the plaintiff's claim of
$ 172,615.19 made up of the $ 145,456.19 for the 13th progress payment as claimed
in Civil Suit No 116/85 and $ 27,159.70 being the final payment as claimed under
Civil Suit No 24-89-86. Learned counsel referred in particular to cll 21-23 and the
appendix to the agreement. All had been referred to by learned counsel for the
plaintiff except cl 23 which provides for extension of time.
Learned counsel for the defendant submitted that the dates of possession and
completion as stated in the appendix and the actual dates of completion of the
relevant units stated in the agreement were not in dispute in which event the
defendant was entitled to the liquidated and ascertained damages prayed for in the
counterclaim on the calculations set out in the appendix amounting to $ 296,414.
Learned counsel went on to say that although cl 23 of the agreement provided for
extension of time, the plaintiff had never availed themselves of this clause and the
architect had never given nor the defendant had ever granted any extension of time
for the completion beyond the agreed date of completion. Reference was made to
Chitty on Contracts, 23rd Ed, at para 20 at p 20 which states 'a date is not essential.
The date of a deed is the date of its delivery' and pars 27 of p 27 which reads 'a party
who executes a deed is estopped in a court of law from saying that the facts stated in
the deed are not truly stated'. On this ground, learned counsel agreed what was
relevant in the agreement are the contents and not the date of signing.
From the appendix to the agreement, time appears to be of the essence. However, the
agreement was signed exactly three months after the purported date of completion. It
is not disputed that the actual dates of completion were 24 August 1983 for the 63
103
units of double-storey terrace houses, and for the seven units of double-storey shophouses and two units of double-storey semidetached houses 30 April 1984 according
to counsel for the plaintiff and 30 August 1984 according to counsel for the
defendant in their submissions.
This would mean the liquidated and ascertained damages stated in the agreement had
already accrued on the date the parties signed the agreement. There is also ample
evidence to show that the defendant never honoured the certificates of payment
within the stipulated time.
These delayed payments had resulted in the plaintiff threatening to stop work as
evidenced by the many letters in the agreed bundles. The defendant had never
objected to the threatened stoppage and had always paid the amounts due later. In
fact, a similar suit had been brought by the plaintiff for the ninth and tenth
payments [*67] and judgment in default had been entered against the defendant
who had paid up the judgment sum, interest and costs without objecting to the late
completion and without raising the issue of the liquidated and ascertained damages.
In Yeow Kim Pong Realty Ltd v Ng Kim Pong [1962] MLJ 118 the Privy Council
held 'that where a party accepts performance without such agreement that party may
not in a subsequent action claim compensation for nonperformance at the time
agreed unless at the time of accepting performance he has given notice of his
intention to do so.'
In Sim Chio Huat v Wong Ted Fui [1983] 1 MLJ 151 the Federal Court compared s
56 of the Contracts Act 1950 to the position arrived at common law. They went on to
state that 'in a contract in which time is of the essence, when a party fails to perform
it by the stipulated time, the innocent party has the right either to rescind the contract
or to treat it as still subsisting. If he treats it either expressly or by conduct as still
continuing, the contract exists but time ceases to be of the essence and becomes at
large. Consequently he cannot claim the liquidated damages under the contract
unless there is a provision as to the extension of time. However, this cessation can be
revived and so time can be restored to be of the essence by the innocent party serving
a notice to the party in default giving a new date of completion.' In that case there
104
was no provision for extension of time as in the present case but the defendant here
never gave notice to the plaintiff as to the revival of the fact that time is of the
essence, having acquiesced in the earlier delays caused by their delayed payments
and having paid the judgment sum for the ninth and tenth payments after a default
judgment without claiming for liquidated and ascertained damages.
On these facts and on the authorities cited, I would hold that time was no longer the
essence of the contract and the defendant was not entitled to the liquidated and
ascertained damages as the court is not in a position to ascertain when the claim for
damages should commence. As the parties have agreed that the plaintiff is entitled to
the amounts claimed, I would therefore give judgment for the plaintiff as prayed with
costs in both civil suits and dismiss the defendant's counterclaim with costs.
Application allowed.
SOLICITORS:
Solicitors: Joseph Tan & Tang; Kamaluddin Maamor & Co.
LOAD-DATE: June 3, 2003
105
APPENDIX – C
[2009] MLJU 0049
© 2009 LexisNexis Asia (a division of Reed Elsevier (S) Pte Ltd)
Malayan Unreported Judgments
Johor Bahru Pyramid Sdn Bhd v Sinometal Punching Technology Sdn Bhd
COURT OF APPEAL (PUTRAJAYA)
CIVIL APPEAL NO J-04-109-2006
DECIDED-DATE-1: 15 JANUARY 2009
ZAINUN ALI, SURIYADI HALIM OMAR, AHMAD HAJI MAAROP, JJCA
JUDGMENTBY: Zainun Ali, JCA
JUDGMENT OF THE COURT
The appeal before us relates to balance of payment of monies due and owing from
the respondent to the appellant for material supplied and work carried out by them.
It is not in dispute that the appellant had completed all works pursuant to the contract.
It is also not in dispute that the appellant was a contractor employed by the
respondent to construct a factory building on the respondent‟s land.
The appellant had been paid a total sum of RM2,418,705 by the respondent, leaving
a balance of RM167,795 which the respondent disputed. The respondent in fact,
attempted to set-off the said sum for the following reasons:
(i) that the respondent has a claim against the appellant for Liquidated
Ascertained Damages (LAD) for the sum of RM162,000; and
106
(ii) that a sum of RM5,295 claimed by the appellant for additional paint
work is not additional works but is part of the original contract sum.
After perusing the notes of evidence and cause papers, we find that there was
overwhelming oral and documentary evidence adduced to support the appellant‟s
case that the respondent was not entitled to claim the LAD. In fact the oral and
documentary evidence adduced were raised without there being any objection
whatsoever by the respondent or its counsel.
The respondent was not entitled to claim LAD for the following reasons:
(a) The delay in completing the project was contributed by the respondent
for their late rejection of the Pantech Solid Aluminium Panels.
(b) There were additional works imposed by the respondent.
(c) There was delay caused by the respondent‟s nominated sub-contractors in
carrying out their respective works, and
(d) the LAD to be imposed was decided by the respondent, and not by the
Consultant Engineer.
It must be noted that the respondent failed to produce the certificate of noncompletion at the trial, when it is clear that the said certificate is essential and is a
condition precedent before the LAD can be deducted. (See Peak Construction
(Liverpool) Ltd. v. McKinney Foundation Ltd 1 BLR 111 [1971]).
Moreover the evidence showed that it was the respondent through SD1 i.e. the
Marketing Director who imposed the LAD, when the LAD should be certified by the
Consultant Engineer.
As shown, the original completion date was on 30.9.1995. It is not in dispute that the
date was extended twice, on 15.10.1995 and on 20.11.1995.
107
The conduct of the respondent and the granting of the extension indicated a waiver of
the condition for making time the essence of the contract. (See Sim Cho Huat v.
Wong Ted Fui [1983] 1 MLJ 07 and Hock Huat Iron Foundy v. Naga Tembaga Sdn.
Bhd. [1999] 1 CLJ .
Moreover, the evidence of SP2 (the appellant‟s Managing Director) that the sum of
RM5,295 claimed by the appellant for additional paint work, went unchallenged.
In the circumstances, we were unanimous in allowing the appeal. This appeal is
allowed with costs, here and below.
Dr Wong Kim Fatt (Mathews George & John Fernandez with him) (R. Muthu & Co)
for the appellant
P. Suppiah (S. Kandasamy with him) (Kanda & Associates) for the respondent
LOAD-DATE: 03/05/2009