Juara Serata Sdn Bhd V Alpharich Sdn Bhd


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(In the Matter of Suit No. 22-165-2007-III In the High Court In Sabah and


Sarawak at Kuching




Alpharich Sdn Bhd (Co. No. 195882-U)


Lot 9681, Sublot 12 (3rd Floor)


Medan Setia Raja Commercial Centre


93350 Kuching, Sarawak … Plaintiff




Juara Serata Sdn Bhd (Co. No. 562614-T)


No. 21, Lot 5439, 2nd Floor Block 16 RH Plaza Jalan Lapangan Terbang


93250 Kuching, Sarawak . Defendant


decided by the Honourable Mr. Justice Datuk Linton Albert In the High Court at Kuching on the 5th day of May, 2011)








[1] This appeal concerned a claim by the respondent, Alpharich Sdn Bhd (“Alpharich”), as plaintiff in the High Court under a building contract for payment under an interim certificate and for additional works. The appellant/defendant, Juara Serata Sdn Bhd (“Juara”), counterclaimed for damages for defective workmanship and for making good the construction defects, and liquidated and ascertained damages for delay in the completion of the project. The High Court allowed Alpharich’s claim on the interim payment with interest thereon, but dismissed the claim for damages for additional works. Juara’s counterclaim was dismissed on all counts.


[2] We dismissed the appeal with costs by a unanimous decision. In our view, the High Court had properly appreciated the evidence and came to the correct findings on the facts and the law. The case was decided by the High Court mainly on issues of construction of the relevant clauses in the building contract, which we will elaborate below.


[3] Essentially, this was a case where the Court was of the view that it would be incorrect to rewrite the bargain between the parties. They were held to their bargain as expressed in the building contract. In brief, the dispute between the parties concerned the effect on the validity of an interim certificate, the role of the Architect as certifier and contract administrator, and contractual mechanism to resolve the dispute touching on the validity of the interim certificate and/or any set-off for defective works and repairs, that can be claimed by the employer




against the contractor to challenge the amount certified by the Architect in the interim certificate for payment.


[4] On the facts of this case, the Architect was appointed by Alpharich.


[5] The building contract in question was an Agreement dated 28.3.2005 between Juara and Alpharich by which Juara appointed Alpharich as the sole and exclusive contractor to construct and complete building works described as “Pusat Latihan Khidmat Negara, Kem Unity’ in Serian, Sarawak. Juara was identified in this Agreement as “the Employer” and Alpharich as “the Contractor”. The Agreement acknowledged that Juara had been appointed to complete the Works, i.e. “Pusat Latihan Khidmat Negara, Kem Unity’ by the Ministry of Defence Malaysia which was the “Client”. On the facts, therefore, Juara had effectively sub-contracted the works to Alpharich. In its relationship with the Ministry of Defence, Juara was appointed as the Operator of the camp for the “Program Latihan Khidmat Negara” (“PLKN”). The “Surat Setujuterima Sewaan Kem” (on pages 419 to 422 of Appeal Record, Vol. 5) showed the returns to be received by Alpharich for this arrangement, and we quote:


“Berdasarkan kadar sewaan…jumlah sewaan bagi tahun ialah


RM5,543,487.00 dan bagi empat (4) tahun ialah






[6] On the other hand, and under the sub-contract arrangement with Alpharich, Juara as Employer was to pay Alpharich the consideration sum of RM4,950,000.00 “upon certification by the Client that the Works have been duly completed” (Clause 2 of the Agreement).


[7] Alpharich agreed to carry out the Works in conformity with the Drawing Plans and the Schedule of Compliance (which were annexed to the Agreement), and to complete the Works on or before 31.5.2005. Alpharich was in effect a turnkey contractor for Juara. It was common ground that the Works were not completed on the agreed completion date, but were certified as completed on 8.7.2005.


[8] The letter from the Architect, Chai Long Sen (PW2), and the accompanying detailed valuation of work done that amounted to a Certificate of Practical Completion, can be seen on pages 404 to 406 of Appeal Record, Vol.1.


[9] On the evidence, Juara had also unconditionally accepted the handing over of the completed works, and had operated the site for the PLKN.


[10] There was a site inspection conducted by the Architect on 16.1.2006 in the presence of Juara and Alpharich representatives to determine the status of the building works, and a Site Valuation Report produced. See pages 443 to 446, Appeal Record, Vol. 1. The Works were confirmed as 100% completed, but a “Building Defect List” was prepared as well, which included “sagging roof”, “roof leakage”,




“sagging ceiling”, “apron crack” and “ponding at toilet and bathroom areas”, with a notation: “Detail Investigation is required at all Blok Kediaman Pelatih to determine the soundness of Roof Structure for occupancy”. The Architect then issued the Interim Payment Certificate, i.e. Interim Payment Certificate No. 1 on 21.11.2006 for the sum of RM1,202,500.00. The sum of RM1,202,500.00 was arrived at on the basis of work done as at 21.11.2006 on the agreed contract sum of RM4,950,000.00 less previous payments made to Alpharich (RM3,500,000.00) and less retention sum of 5% (RM247,500.00).


[11] In his testimony, the Architect (PW2) said that he was sufficiently apprised of the work done and had sufficient information on which to issue the Interim Payment Certificate.


[12] This interim certificate was issued under Clause 8 of the Agreement, in particular Clause 8.1:


“8.1 Within Seven (7) days of receiving the Statement of Work Done, the Architect/Consultant shall issue an interim certificate (hereinafter referred to as “the Interim Certificate”) to the Employer (with a copy to the Contractor) stating the amounts to which the Contractor is, in the Architect/Consultant’s opinion, entitled in respect of each of the amounts stated in the Statement of Works done.”


[13] Clauses 8.2 and 8.3 provided for the retention by the Employer of the 5%, and Clause 8.4, the payment of interest at 1% per month




calculated on a day to day basis from the due date (date of receipt of the Interim Certificate) until payment.


[14] On the facts, it was evident that the Interim Certificate was issued after the expiry of the defects liability period that had ended 10 months earlier.


[15] Juara did not make a reference to the Architect to dispute the sum, and further, did not initiate steps to refer the dispute to arbitration.


[16] It is common ground that no Final Certificate was issued by the Architect. Juara did not pay the certified amount under the Interim Certificate, arguing that Alpharich had not constructed the camp in accordance with the Schedule of Compliance, failed to comply with the drawing specifications, failed to provide septic tanks, failed to complete the project on time, and had failed to remedy defective works. Juara argued it had no choice except to accept the handover since it had to satisfy its commitment to the Ministry of Defence to take in the national service candidates, although it had to scale down the number of intake. Juara argued it had to spend RM1,338,459.44 for remedial works, and thus counterclaimed for the same. As for the Interim Certificate, Juara maintained that it was fatally flawed and invalid since it was issued without complying with the requirements of Clause 8 that required a Statement of Works Done to be first sent to the Architect.


[17] Juara also attacked the issue of the Interim Certificate as tainted by mala tides on the part of the Architect who had failed to act




professionally and impartially. It argued that the Architect had acted to serve merely the interests of Alpharich.


[18] The High Court allowed Alpharich’s claim on the Interim Certificate but not its claim for additional works. The High Court also dismissed Juara’s counterclaim. The learned judge came to his findings and decisions based on the contractual provisions, more exactly Clauses 7, 8, 16 and 17.


[19] The learned judge was swayed by the reference made to the Architect by Alpharich under Clause 16, and the failure by Juara to resort to the mechanism provided under Clause 17 in the event of a dispute on the certification, namely to refer the dispute to arbitration. To appreciate the train of analysis of the High Court, we reproduce below the relevant parts of his lordship’s judgment:


“Chai Long Sen (PW2) testified that at all material times he was a practising Architect in Jurubina Unireka and was appointed by the Plaintiff under Clause 22.4. The salient features of PW2’s role under the Agreement are set out in the following clauses:


Clause 6 – The issuance of a certificate of non-completion upon which the defendant can claim from the plaintiff the sum of RM450.00 per day as liquidated and ascertained damages for the period during which the works stated remain incomplete.




Clause 7 – Issuing the Certificate of Practical Completion whereby the works shall be deemed to be completed on the date named in the certificate.


Clause 8 – To issue Interim Certificate to the defendant stating the amount to which the plaintiff is entitled for works done; and Clause 16 – The same is reproduced for the sake of completeness and clarity:




16.1 In the event of any dispute or difference arising between the Employer and the Contractor, either during the progress or after the completion of the works, or after the determination of the Contractor’s engagement or breach of this Agreement or the repudiation or abandonment of this Agreement by either party as to –


16.1.1 the withholding of any certificate, decision or instruction to which the Contractor may claim to be entitled to; or


16.1.2 the withholding of any payment to which the Contractor may claim to be entitled to under this Agreement; or


16.1.3 any other matter arising under or, out of, or in connection with this Agreement or the Works;


Then such dispute or difference shall be referred to the Architect/Consultant for a decision.”




[20] As earlier indicated, Alpharich made a reference under Clause 16.1. The Architect wrote to both parties on 16.10.2006 and 14.12.2006 stating the following respectively:


“With reference to our Certificate of Practical Completion, the scope of works as indicated in the drawings has been practically completed for all purposes of the Contract.”


“Our decision under Clause 16.2 of the Contract is that Alpharich is entitled to payment by the Employer of the sum of RM1,202,500.00 under Payment Certificate No. 1”


[21] The learned judge noted that Juara did not show that it was dissatisfied with the two decisions he made since it did not refer the matter to arbitration under Clause 17, which read:


“17.1 In the event –


17.1.1 the Architect/Consultant shall fail to give his decision;


17.1.2 either party is dissatisfied with any decision of the Architect/Consultant given pursuant to Clause 16.2 (such dissatisfaction shall be deemed a dispute), then the Employer or the Contractor may within a further seven (7) days after the expiration of the said 14 days after receiving the Architect/Consultant’s decision, whichever is earlier give notice to the other party of its intention to refer the dispute or difference to arbitration (hereinafter referred to as the “Notice of Arbitration”) for decision by a sole arbitrator.”




[22] The most important part of the High Court judgment read:


“Held to the Agreement, the various excuses for non-payment of the amount certified by PW2 as set out in the pleaded defence are non-starters by virtue of Clause 16.2 because none was referred to PW2 under Clause 16 nor was the decision of PW2 in respect of his Certificate for Payment…”


[23] In short, the High Court was unwilling to “audit the bargain” of the parties. The various reasons for non-payment of the Interim Certificate amount were described as “non-starters” because of the failure by Juara to adhere to the contractual mechanism for dispute resolution. This emphasis on clear contractual requirements also led to the other decisions of the learned judge to dismiss the Alpharich’s claim for additional works (relying on Cause 4.6) and Juara’s counterclaim for damages and LAD (relying on Clauses 7.2 and 6). Referring to Clause 4.6, Alpharich’s claim for additional works failed because it could not show that the variations were agreed in writing. Juara’s claim for amounts expended by Juara to third parties to remedy defective works failed because it could not show any written instructions from it to Alpharich to make good the defects under Clause 7.2. As regards the LAD claim, the High Court relied on the Proviso to Clause 6 that required the Architect to first issue a Certificate of Non-Completion, reading:


“PROVIDED ALWAYS that the Employer shall not be entitled to claim any loss or damage under this Clause unless and until the Architect/Consultant shall have issued to the Employer a




certificate in writing stating that in the Architect/Consultant’s opinion the Works (or the relevant part thereof) ought reasonably to have been completed by the Completion Date or within any extended period or periods (as the case may be).”


[24] We considered appellant counsel’s detailed submissions on the law and the less than satisfactory testimony of PW2, particularly in relation to the non-compliance of Clause 8 and the need to establish that a Statement of Works Done had been forwarded to the Architect by Alpharich before he issued the Interim Certificate No.1. The answers given by PW2 were found to be non-committal or evasive, but the fact remained the Agreement itself did not contain a definition of “Statement of Work Done”, and there was no dispute that the Architect conducted a site inspection and evaluation before he issued the Interim Certificate. The Architect’s delay in issuing the Interim Certificate until after the expiry of the Defects Liability Period was also odd. We had no issue on the law on the duties and responsibilities of an Architect/Consultant as Certifier and the circumstances when an Interim Certificate can be challenged for invalidity. The persuasive authority in the Singapore High Court decision in Tropicon Contractors Pte Ltd v Lojan Properties [1989] 3 MLJ 216, cited by counsel, which lay down the law that an Interim Certificate issued without fulfilling stated pre-requirements would be invalid, however, was not, to our mind, of immediate relevance in view of the larger issue which became the foundation of the High Court decision, namely Juara had to be held bound by the terms of the Agreement and it had failed to adhere to the dispute resolution mechanism agreed by the parties.




[25] In our view, and after carefully considering appellant counsel’s oral and written submissions and the submissions by respondent’s counsel, we found that the high Court had not plainly erred in law, or on the facts, to warrant appellate intervention. Having concluded thus, we were not departing from the established law on the status and validity of Interim Certificates, and the functions and responsibilities of the Architect/Consultant as Certifier. The challenges to the validity of the Interim Certificate and the exercise of the responsibilities and duties of the Architect should however have been properly brought before an arbitral tribunal as stated in the Agreement. On the general law, suffice for us to quote from Sundra Rajoo, Harbans Singh, Construction Law in Malaysia (2012), which contains a concise and clear exposition of the law:


“An Interim Certificate… represents essentially an approximate value of the work done at the time of its issue and may be adjusted in subsequent certificates for matters such as errors, overvaluation, etc.; the final date for doing so being generally the date of issue of the Final Certificate (see Lubenham Fidelities & Investment Co Ltd v South Pembrokeshire District Council &


Anor [1986] 33 BLR 39; see also Fairclough Building Ltd v Rhuddlan Borough Council (1985) 30 BLR 26 and Asiapools (M)


Sdn Bhd v UM Construction Sdn Bhd [2010] 3 MLJ 7.


The validity of a certificate may, however, be compromised if it can be successfully challenged on grounds such as the existence of errors on its face, fundamental inaccuracies in content and computation, it not being in correct form, it not being issued in the authorized manner or by the authorized person, it not being given




in time, where the Certifier acts ultra vires, where there is improper pressure or influence on the Certifier, where there is fraud or collusion between the Certifier and the relevant party to the contract, etc…” (at page 389 of the Text).


[26] Thus, for the reasons elaborated above and the failure by Juara to resort to the agreed dispute resolution mechanism, the appeal was dismissed with costs of RM10,000.00 to the respondent.


[27] We further ordered the deposit to be paid to the respondent to account of costs.








Court of Appeal Malaysia


Dated: 30th December 2014




For the appellant: Yong Sie Mee


Messrs Loke, King, Goh & Partners Advocates


1st Floor, Lot 301, Section 9 Lorong Rubber No. 9 Jalan Rubber 93400 Kuching, Sarawak.




For the respondent:


Mekanda Singh Sandhu &


Satinder Singh Sandhu Messrs Sandhu & Co. Advocates


Lot 279, First Floor, Jalan Rubber 93720 Kuching, Sarawak.



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