[2017] 1 LNS 1386 Legal Network Series

IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR

IN THE STATE OF WILAYAH PERSEKUTUAN, MALAYSIA

(CIVIL DIVISION)

[SUIT NO: WA-22C-28-04/2016]

BETWEEN

TAN CHANG YONG HOLDINGS SDN. BHD.

(Company No: 446487-H) … PLAINTIFF

AND

CORPORATE SUNRISE SDN BHD

(Company No: 746879-A) … DEFENDANT

THE JUDGMENT OF
Y.A. LEE SWEE SENG

[1] The Plaintiff had in 2008 purchased an 11 storey building in

Johor Bahru, Johor. In early 2009 it decided to renovate and refurbish
the said building into a hotel (“the Project”) to be known as
“11@CENTURY” (“the Hotel”). The location was strategic for the
purpose as it was located in the centre of the city within the prime
commercial areas and about 2 km from Singapore. The Plaintiff had
plans to commence operation of the hotel in January 2010 and so
everything was required to be done in a hurry.

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Project

[2] The Project involved Architectural works, Civil and some

Structural works, Mechanical and Electrical works (M&E Works) and
Interior Design and related works.

[3] At the invitation of the Plaintiff and under the direction of the
Plaintiff’s M&E Consultant JPK & Associates, the Defendant
prepared a Schedule of Tender Price for the M&E Works for the
quoted sum of RM10,074,124.80 (“Quoted Sum”).

[4] The Plaintiff appointed the Defendant to do the M&E Works by

a Confirmation Letter dated 1.9.2009 (“the Contract”) which has
annexed to it the Schedule of Tender Prices for the Works.

[5] The Contract does not follow any of the standard forms in the
market and indeed is quite rudimentary and contained in 4 pages
excluding the Schedule of Tender Prices submitted by the Defendant.
The understanding given to the Defendant was that it was to be a fast-
track job to be completed within only 3 months.

[6] Quite glaringly the Contract does not contain the standard
clauses on submission of claims and certification, issuance of
Certificate of Non-Completion and Certificate of Practical
Completion, application for extension of time and Liquidated and
Ascertained Damages (“LAD”) clauses.

[7] All the Quantities indicated by the Defendant in the Schedule of

Tender Price are provisional only and that the “Tenderers are to
determine at Site the actual dimensions and site conditions and price
accordingly.” After some negotiations and at the request of the
Plaintiff, the Defendant agreed to a discount of 3% from the Quoted
Sum, thus reducing the final Contract Sum to RM9,780,726.00 with a

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fixed payment schedule stretching from September 2009 to March

2010. There was also the provision of a retention sum of 5%.

[8] The other salient term was the Contract Period where the
commencement of works was 1.9.2009 and the completion date was
stated as “by end of November 2009”.

[9] The breakdown on the M&E Works (“the Works”) cover

Electrical works, Plumbing, Sanitary and Hot Water System and Fire
Protection System works.

Problem

[10] The Plaintiff complained of various breaches of the Contract by

the Defendant and in particular the failure to complete the Works by
30.11.2009 and the failure to install the air conditioning system
correctly so as to ensure that the system is fully functional for the
entire hotel.

[11] However at the end of the day after the amendments made to the
Statement of Claim, the Plaintiff had only claimed for damages to be
assessed for paragraph 8.2 of the Amended Statement of Claim. Thus
the Plaintiff’s prayer in the Amended Statement of Claim in paragraph
10.1 is for damages to be assessed for loss of Room Charges for
paragraph 8.2 which reads as follows:

“8.2 Loss of Room Charges

8.2.1 The Plaintiff was unable to allow full occupancy of the

Hotel due to the problems relating to the Air Conditioning
system.

The estimated losses in revenue are approximately

RM3,823,960.00.

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8.2.2 There are also numerous complaints of the Hotel guests

and many of them will (not) stay at the Hotel in (the) future.

As such, the intended development of the Hotel’s reputation and

good name has been tarnished.”

[12] The Defendant denied that it had breached the Contract and in
reply thereto stated that it had executed the contract works with the
approval of the M&E Consultant appointed by the Plaintiff and that
the M&E Consultant had approved the works done by the Defendant
including the Variation Orders. The Defendant further averred that the
M&E Consultant had inspected and verified the M&E works done
before approving its payment. Based on the Statement of Final
Account for the M&E Package prepared by the M&E Consultant dated
11.6.2010 the Final Account Sum after taking into consideration the
Variation Orders is RM9,624,049.54 and as only the sum of
RM4,857,863.00 had been paid, the balance sum claimed by the
Defendant was RM4,766,186.54 in the Amended Defence and
Counterclaim.

[13] The Defendant had also claimed for interest at 8% per annum
from the date of the Statement of Claim on 11.1.2011 until settlement.

Previous Proceedings

[14] This would be an opportune time to state that originally this suit
had been tried in the Kuantan High Court and the learned Judge had
allowed the Plaintiff’s claim of RM3,794,000.00 for loss of Room
Charges and had dismissed the Defendant’s counterclaim as having
not been proved.

[15] On appeal by the Defendant, the Court of Appeal had set aside
the said judgment of the Kuantan High Court and had ordered a retrial

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before another Judge presumably because the remedy given was not
what was prayed for.

[16] The focus of the Plaintiff’s claim as pleaded in the original

Statement of Claim had been on a claim for damages to be assessed
for the wrongful presentation of a winding up petition by the
Defendant for failure of the Plaintiff to pay the Defendant the sum
claimed by the Defendant under the Contract. However the Plaintiff
had conducted the trial with evidence being led on the Plaintiff claim
for damages for the loss of the Room Charges and the Defendant for
the sum due under the Statement of Final Accounts as prepared by the
M&E Consultant to justify the sum that it had sought to wind up the
Plaintiff for non-payment of what it claimed to be an undisputed debt.

[17] It fell upon me to hear the matter upon the Court of Appeal
ordering a rehearing. Parties were amenable to amend their respective
Statement of Claim and the Amended Defence to Counterclaim and so
the amendments were effected to the Pleadings by consent and a
Bundle of Amended Pleadings was filed for ease of reference. Both
parties also agreed that there was no need to adduce fresh evidence
and that this Court may proceed to decide after perusing the Notes of
Evidence (“NOE”) of the trial in the Kuantan High Court and after
reading the written submissions of counsel and hearing both counsel.

[18] After studying the NOE I agreed with both counsel that this was
a matter where this Court could decide based on the evidence adduced
which primary evidence was in the written letters, documents,
statement of accounts, minutes and reports filed with the Kuantan
High Court and made available to this Court without any
disadvantages that may be had arising out of not having the audio-
visual opportunity to hear and see the witnesses.

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Principles

Whether the Plaintiff had proved the Defendant’s breach of the

contract and the damages arising naturally from the breach in the
loss of the Room Charges for the relevant period

[19] To begin with there is no LAD clause and even if there is one, it
is for the Plaintiff to prove its loss as stated in Selva Kumar A/L
Murugiah v. Thiagarajah A/L Retnasamy [1995] 1 MLJ 817 which was
reaffirmed by a later Federal Court case of Johor Coastal
Development Sdn Bhd v. Constrajaya Sdn Bhd [2009] 4 MLJ 445.

[20] There was also no clause on issuance of a Certificate of Non

Completion which is normally issued upon the expiry of the
Completion Date so that the Defendant would be put on notice that
LAD is payable if it can be proved.

[21] Bereft of these 2 clauses normally found in construction

contracts, there is difficulty in the Defendant completing the M&E
Works by 30.11.2009 when along the came Variation Orders approved
by the M&E Consultants. The rudimentary agreement is also devoid
of any clause on application for extension of time.

[22] The Variation Orders were to the tune of RM879,762.84 as can

be seen in the Defendant Core Bundle of Documents page 32. As there
is no provision for extension of time, it has to be implied that a
reasonable time has to be granted for additional work done.

[23] The term implied here would pass the officious bystander test
stated in Shirlaw v. Southern Foundries [1926] Ltd [1939] 2 KB 206
at page 227 where McKinnan LJ described an implied term to be
“....something so obvious that it goes without saying; so that, if, while
the parties were making the bargain, an officious bystander were to

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suggest some express provision for it in their agreement, they would

testily suppress him with a common “Oh, of course!”.

[24] This is more so in a construction contract where variation works

are not uncommon and that there would generally be an extension of
time clause in the event variation works are instructed by the
Superintending Officer. In the absence of such a clause one can infer
and imply that a reasonable extension of time would be granted.

[25] This reference to an implied term can also be justified by the

Business Efficacy Test as propounded in Luxor (Eastbourne) Limited
and Others v. Cooper [1941] AC 108 where Lord Wright speaking
from the House of Lords at page 137 described an implied term to be
“...there may be cases where obviously some term must be implied if
the intention of the parties is not to be defeated, some term of which
it can be predicated that “it goes without saying”...necessary to give
to the transaction such business efficacy as the parties must have
intended.”

[26] In BP Refinery (Westernport) Ptd Ltd v. Shire of Hastings

Council [1977] 16 ALR 363, the Privy Council helpfully set out the
principles upon which the court will act in implying terms to the
contract. i.e.

1) The term must be reasonable and equitable.

2) It must be necessary to give business efficacy to the contract so

that no term will be implied if the contract is effective without it.

3) It must be so obvious that is goes without saying.

4) It must be capable of clear expression.

5) It must not contradict any express terms of the contract.

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See Yap Nyo Nyok v. Bath Pharmacy Sdn Bhd [1993] 2 MLJ 250 and
the Federal Court case of Sababumi (Sandakan) Sdn Bhd v. Datuk Yap
Pak Leong [1998] 3 MLJ 151 where the Federal Court applied both
the “officious bystander test” and the “business efficacy test”.

[27] Learned counsel for the Plaintiff had cited the above cases to
justify importing implied terms that the Defendant as contractor
would properly carry out the works with proper workmanship and
materials. That is already a given and in fact the cases cited would be
more relevant to importing and imposing an implied term of extension
of time if additional Variation works are instructed, in this case by the
M&E Consultant.

[28] Time is generally not of the essence in a construction contract

and if the Plaintiff had wanted to declare the Defendant in default
after 30.11.2009, one would have expected a Notice of default given
to the Defendant. As no Notice was given time becomes at large and
the Defendant as contractor should complete the works within a
reasonable time.

[29] The Defendant handed over the building with the works duly
completed on 6.1.2010. In the circumstances I do not think that the
Defendant could be said to be in default since 1.12.2009 till 6.1.2010.

[30] This is also a case where the Plaintiff had agreed to a scheduled
monthly payments to the Defendant but had defaulted in the
payments.

The final Contract Sum after negotiation and with a 3% discount

given from the Quoted Sum was RM9,780,726.00 with a fixed
payment schedule in the following manner:

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Gross Retention Net

-Sept’ 09. 3,000,000. 150,000. 2,850,000
-Oct’ 09. 1,000,000. 50,000. 950,000
-Nov’ 09. 1,000,000. 50,000. 950,000
-Dec’ 09. 1,000,000. 50,000. 950,000
-Jan’ 10. 1,000,000. 50,000. 950,000
-Feb’ 10. 500,000. 50,000. 500,000
-Mar’ 10. Balance

[31] The Plaintiff paid the initial first few payments according to the
agreed payment schedule in the Contract. However the Plaintiff
defaulted in November 2009 at a crucial time when the Defendant had
a balance one month to complete the Works.

[32] The Plaintiff tried to make it up for the month of December

2009 in the sum of RM1,057,863.00 though this still fell short of the
combined sum of November and December 2009 of RM1,900,000.00.

[33] The fact that the Hotel commenced operation on 16.1.2010 was
admitted by the Plaintiff’s own witness PW 1, Mr Tan Wee Lee, the
Manager of the Plaintiff as follows at page 50 NOE:

“113) S: When did the Hotel commence operation, isn’t it

16.1.2010?

J: Yes, we announced it to the public on that date.

114) S: And it’s also posted on your website that the Hotel
commenced business on 16/1/2010?

J: Yes, it was”

[34] In a case like this where there is no Notice of default, no

Certificate of Non-Completion and delay in the agreed schedule of

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payment by the Plaintiff, it can hardly be said that the Defendant as

contractor was in default from 1.12.2009 to 6.1.2010.

[35] Assuming for a moment that there was breach on the part of the
Defendant in failure to complete the works by 30.11.2009 and only
completed by 6.1.2010, has the Plaintiff proved their loss in the Room
Charges for the year 2010 from January to December based on total of
non-saleable rooms amounting to RM 3,823,960.00 as claimed in the
Amended Statement of Claim?

[36] To begin with the damages has to be strictly proved. In Popular

Industries Limited v. Eastern Garment Manufacturing Sdn Bhd [1989]
3 MLJ 360 it was highlighted as follows at pages 367-369:

“It is axiomatic that a plaintiff seeking substantial damages has

the burden of proving both the fact and the amount of damages
before he can recover. If he proves neither, the action will fail
or he may be awarded only nominal damages upon proof of the
contravention of a right. Thus nominal damages may be awarded
in all cases of breach of contract. And, where damage is shown
but its amount is not proved sufficiently or at all, the court
usually decree nominal damages.

When, as here, the claim is for the difference between the

contract price and a clear and undoubted market price, absolute
certainty in proving damages is possible and therefore the court
will expect precise evidence to be given.

In all the circumstances, reason and justice pointed to inevitable

conclusion that although the plaintiffs had shown the fact of
damage, no evidence or no sufficient evidence had been adduced

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as to its amount with the perhaps unfortunate result that it is

virtually impossible to assess damages.

Accordingly, all I can do is to make an award of nominal

damages of US500, that being the currency of the contract.”

[37] There is no basis for the Plaintiff to claim the gross Room
Charges because if at all there is loss suffered by the Plaintiff it must
be confined to the loss of profit attributed to the Rooms Charges that
could not be charged because the guests have to be turned away as a
result of the rooms not being ready.

[38] However there is no evidence led as to the costs in running the

Hotel when divided by the number of rooms. The damage suffered
must be limited to the loss of profit and not loss of Room Charges or
loss of revenue. To charge loss of Room Charges to the Defendant
would mean there is no costs element at all in the running of the
Hotel! That cannot be right. Costs in running a Hotel would cover
staff costs, food and beverage costs, utilities, marketing and
promotion costs and the like.

[39] From the documents prepared by the Plaintiff to substantiate and

support their claim for loss of Room Charges there is clearly a case
where going by rooms available for the various months from January
to December 2010 there is not full occupancy of the rooms available.
See pages 733-745 Tab O of Plaintiff’s Core Bundle of Documents.

[40] From the evidence of PW 2, Miss Laura Daniel, who worked as

a secretary in TCY Century Management Sdn Bhd, the company that
manages the Hotel, we learned that the occupancy rate of the Hotel
even based on the rooms available, according to her, was 20.44% in
January 2010 and increases to 53.05% by December 2010. As she only
started work in August 2010 she had no personal knowledge of the so-
called loss of Room Charges from January to July 2010. When asked

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why the rooms were not let out she was candid to admit that
technically she did not know.

[41] That being the case, there is no basis for charging the so-called
Rooms not available to the Defendant when the Plaintiff themselves
could not fully let out the available rooms. It is of course not unusual
and indeed quite common for a new hotel not to have full occupancy
during the initial years of business. To charge the Defendant based on
a 100% occupancy when that was not achieved throughout 2010 would
be to require the Defendant to pay for what the Plaintiff could not
achieve on their own and that would amount to a windfall and be
against all known principles of assessment of damages!

[42] Learned counsel for the Defendant advanced yet another ground
as to why the Plaintiff is not entitled to a claim of RM3,823,960.00.
The Plaintiff has entered into a management agreement whereby one
of its subsidiaries TCY Century Management Sdn Bhd (“TCY”) shall
manage the Hotel and pay to the Plaintiff 30% of the net revenue as
provided for in Clause 4.2. The agreement is at Tab V of the
Plaintiff’s Core Bundle of Documents.

[43] It is trite law that even wholly owned subsidiaries are separate
legal entities from its parent company. To make it even clearer it was
provided in Clause 4.5 that TCY was not operating the Hotel as an
agent of the Plaintiff; in other words TCY was a separate and distinct
entity operating the Hotel in its own right.

[44] If authority is needed one can cite the case of Mackt Logistics
(M) Sdn Bhd v. Malaysian Airline System Bhd [2014] 2 MLJ 518
where it was observed that:

“[24] In Malaysia, the Salomon principle was applied in Abdul

Aziz bin Atan & 87 Ors v. Ladang Rengo Malay Estate Sdn Bhd
[1985] 2 MLJ 165 There, the issues that come up for

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determination were whether the estate was sold and, if so,

whether a change of employer took place. The court dismissed
the appeal and held that an incorporated company was a legal
person separate and distinct from the shareholders of the
company. At pp 167-168, Shanker J had this to say:

It is trite law that an incorporated company is a legal

person separate and distinct from the shareholders of the
company. The company from the date of incorporation has
perpetual succession and the Companies Act provides that
the liability on the part of the shareholders to contribute to
the assets of the company will be limited in the manner
provided by law and its memorandum and articles of
association. The whole point of forming a limited company
is that the shareholders can have in their hands the
management of the business without incurring the risk of
being under unlimited liability for the debts of the
company.

…….

[26] Zakaria Yatim J (later FCJ) in Bank Bumiputra Malaysia

Bhd & Anor v. Lorrain Esme Osman & Ors [1987] 1 MLJ 502,
rightly held that a holding company and its subsidiary are
separate entities.”

[45] There is no evidence that the Plaintiff has not received the
agreed fees for the year 2010. On the contrary the evidence led is that
the Plaintiff had received RM2.477 million from TCY in 2010. The
evidence is borne out by the testimony of PW 1, the Manager of the
Plaintiff in cross-examination as follows at pages 137-138 of the
NOE:

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“6) S: Do you also know that from 11/12/2009 whatever

income collected from the hotel ought to go to TCY
Century Management Sdn Bhd, correct?

J: Yes

7) S: Do you also agree that from 11/12/2009 whatever

monies that Tan Chang Yong can collect in respect of
this hotel will only be 30% of what Century
Management has collected, correct?

J: Yes.

8) S: Therefore, do you agree with me if you look at Enc

61 page 72, about the revenue of the company and
the group and do you agree with me that at page 72,
in respect of the hospitality income of RM2.477
million which goes to Tan Chang Yong Holdings,
correct?

J: Yes.

9) S: So, therefore in 2010, RM2.477 million if this

agreement is accepted is only 30% of the revenue of
the Hotel, correct?

J: Yes.”

[46] There is a yawning gap between the sums as given by the

Manager PW 1 in that 30% of the gross revenue of the Hotel in 2010
was RM2.477 million and that of PW 2 the secretary of the TCY that
manages the Hotel as based on her evidence, the whole of the gross
revenue from the Room Charges is only RM2,265,363.39 by adding up
the revenue from January 2010 to December 2010 from pages 734-745
of the Plaintiff’s Core Bundle of Documents.

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[47] At the end of the day one cannot escape the observation that the
documents produced by the Plaintiff itself do not support and
substantiate the Plaintiff’s loss. In fact the contradiction in the gross
revenue from the Room Charges between the evidence of PW 1 and
PW 2 would cast doubts of the reliability of those sums from which
the Plaintiff is trying to project the loss of revenue from the Room
Charges for the whole of 2010 attributable to the breach by the
Defendant of the Contract. One is reminded of the dicta in Sony
Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007] 2 MLJ 229
where it is summarized as follows in the head notes:

(1) It was clear that the statement of account exhibited were

by themselves not sufficient to establish the respondent’s
claim for damages. They only showed profit for 1996 and
1997. They did not show how the alleged loss had come
about. The respondent failed to prove the contents and
show how their contents were related to the alleged breach
of the agreement. No evidence whatsoever was led by the
respondent with regard to the computation or breakdown of
the loss allegedly suffered therefrom flowing from the
breach (see paras 53-54).

(2) The respondent’s failure to produce or tender the account

books or the necessary support documents upon which the
audited statements of account were based is fatal to his
claim for damages. Thus, the audited statements of account
and the respondent’s oral evidence in connection therewith
were inadmissible (see para 55).

(3) In a situation where there is an infringement of legal right

such as this but where there is no basis for ascertainment
of the amount of loss suffered, a nominal damage may be
awarded (see para 97)…”

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[48] From the Plaintiff’s own documents stating the number of rooms
available per month. One would notice that even assuming for a
moment that the unavailable rooms are attributed to the fault of the
Defendant somehow, there is still no 100% occupancy of the so-called
available rooms. Therefore there is no room for the argument that
guests had to be turned away because there is full occupancy of
available rooms with the result of loss of Room Charges leading to
loss of profit.

[49] This is the case every month for the whole year of 2010 and
even though the occupancy rate has improved by December 2010 it
was just 53.05%.

To calculate loss of profit based on loss of revenue in the Room

Charges would not only be contrary to all known principles of
assessment of damages without taking into account the costs factor
but it would also be totally unrealistic to calculate based on the
projection of 100% occupancy for all the rooms every month for a
hotel in the first year of its operation.

[50] The Court of Appeal in Lay Hong Food Corporation Sdn Bhd v.
Tiong Nam Logistics Solutions Sdn Bhd [2017] 1 LNS 708 rejected
self-serving summaries of losses suffered by the Plaintiff without the
empirical base documents to substantiate and support the base data.
The Court of Appeal astutely observed as follows:

“48. On another note, the basis of the claim by the Plaintiff (TN
Logistics) for damages for loss of profits is based on an
average of sales multiplied by 6 months. The Plaintiff (TN
Logistics) is relying on the average gross sum of the
invoice value. This cannot be an accurate figure as
overhead costs such as petrol, the costs of hiring of
drivers, operation costs and maintenance has to be factored
in, to arrive at a net figure. Only then can a realistic profit

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figure be arrived at. To allow such a manner of calculation

as adduced by the Plaintiff (TN Logistics) would be to
allow the Plaintiff (TN Logistics) to claim for more than
what it was entitled to, which is plainly wrong. The
Federal Court in SPM Membrane Switch Sdn Bhd v.
Kerajaan Negeri Selangor [2016] 1 CLJ 177 had occasion
to deal with this point when it held that:

“However, we do not approve of the appellant’s

method of calculation for the loss of profits...This
calculation does not reflect the principles of
compensation for loss of profits and will put the
appellant in a position well beyond that which it
would rightfully be in, had the contract been properly
performed. A calculation based on “commissions”,
that is to say receipts, is very different from a
calculation based on “profits”. To award damages
based on commissions would completely disregard
the fact that had the contract been properly
performed the appellant would have had to incur
expenses and costs of operation, among other things.
The proper sum should therefore be net of all the
expenses that would be reasonable incurred in the
remaining 20 month period. To do otherwise would
give the appellant more than they would have
obtained had the contract been performed, and
therefore more than what they rightfully deserved.”

49. It is also to be observed that in making its claim for loss of

profits, the Plaintiff (TN Logistics) had produced a sheet
of paper (See CB Vol 3 page 503) known as “Lay Hong
Billing summary” in the sum of RM1,555,675.14. This
sheet of paper is unsigned. There were no primary

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documents or audited accounts produced by the Plaintiff

(TN Logistics) to prove the facts and the amount of the
stated sum as loss of profits. Nevertheless, this was
accepted by the learned JC as adequate proof of damages
for the claim in loss of profits.

Edgar Joseph J (as he then was) in his judgment in Popular

Industries Ltd v. Eastern Garment Manufacturing Sdn Bhd
[1990] 2 CLJ Rep 635; [1990] 1 CLJ 133; [1989] 3 MLJ
360 which has since been adopted by the Court of Appeal
and Federal Court observed that this is not the appropriate
method in proving of damages when he said the following
at pages 366-369:

“I now turn to consider the crucial question: have the

plaintiffs proved their claim for damages as alleged
or at all? With regard to this part of the case, I would
preface what I have to say by referring to certain
well-established principles.

It is axiomatic that a plaintiff seeking substantial

damages has the burden of proving both the fact and
the amount of damages before he can recover. If he
proves neither, the action will fail or he may be
awarded only nominal damages upon proof of the
contravention of a right. Thus nominal damages may
be awarded in all cases of breach (see Marzetti v.
William). And, where damage is shown but its
amount is not proved sufficiently or at all, the court
will usually decree nominal damages.”

50. In Popular Industries Ltd v. Eastern Garment

Manufacturing Sdn Bhd (supra), the Chartered Accountant
who was called as a witness to prove the fact of damages,

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produced a sheet of calculations, P76 which was to show

the estimated losses suffered by the plaintiffs therein due
to the non delivery by the defendant of the goods. This
method of calculation without any independent evidence
was not approved by the Courts as enunciated by Lord
Goddard in Bornham-Carter v. Hyde Park Hotel [1948]
WN 89:

Plaintiffs must understand that if they bring actions

for damages it is for them to prove their damage; it is
not enough to write down the particulars, and so to
speak, throw them at the head of the court, saying.
“This is what I have lost, I ask you go give me these
damages”. They have to prove it.”

51. This method of calculation by using a sheet of paper

consisting of summaries of billings without more has
been repeatedly rejected by our courts. (See Sony
Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007]
1 CLJ 611; [2007] 2 MLJ 229: Wasal Construction Sdn
Bhd v. Boh Huat Chan Timber Products Sdn Bhd [2013] 1
LNS 1269; [2014] 4 MLJ 294).

52. The Supreme Court case of KPM Khidmat Sdn Bhd v. Tey
Kim Suie [1994] 3 CLJ 1; [1994] 2 MLJ 627 established
the rule of evidence that “when documentary evidence is
tendered, primary evidence of the said document must be
adduced except in cases under section 65 of the Evidence
Act 1950.

53. PW 2 in his evidence admitted that the “Lay Hong Billing

Summary” from January 2008 - March 2009 (page 503 CB
3) was produced as proof of total sum of RM1,555,675.14
and that he was not the maker of such summary.

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54. Balance Sheets or Summary of Billings do not by

themselves prove the facts stated therein. It has to be
proven like any other fact, be it affidavit or otherwise.
The facts as stated in the Summary of Billings are mere
statements and it cannot be taken as proving that the
statements are correct. It has to be proved by calling
the maker to explain the facts and the basis of the
calculation of the amount which is being claimed. In
our present case, no evidence of the basis of the
summary of the billings was adduced.

55. In the upshot, in proving damages, real or factual evidence

must be adduced as opposed to mere summaries or general
estimations and conclusions before a party can succeed in
its claim.” (emphasis added)

[51] There is also no basis for saying that the Defendant had failed to
rectify the air-conditioning problem in the Hotel rooms resulting in
the rooms not being available for guests to use. There is no written
notice to the Defendant setting out the rectification works that are
required to be done and rooms and floors where these works have to
be done.

[52] The Plaintiff said that a lot of guests had complained of the air-
conditioning not being cold enough. If that be so one would have
expected the Plaintiff to produce the complaint form or at least the
Job Sheet form duly filled up by the maintenance staff attending to
the problem or some contemporaneous reports of the maintenance
team. None of these were produced and so what we have is the
Plaintiff’s mere “say so”. That falls below the proof that is required
on a balance of probabilities.

[53] The only written complaint of air-conditioning being not being

cold enough was made only in October 2010 some 10 months after the

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completion of the M&E works and it was only at Level 9. This was
admitted by the Manager of the Plaintiff PW 1 in Q&A 111 at page 49
NOE.

[54] The Defendant had duly attended to it and the readings taken of
the temperature showed that the problem had been rectified. The
representative of the company that manages the Hotel, TCY, had also
signed off on the “Air Conditioning Testing Sheet”. The Discharge
Temperature and Room Temperature of all the 24 Rooms on Level 9
of the Hotel were tabulated to indicate that the problems had been
rectified. After that incident there has been no other complaints that
the Plaintiff could produce in writing.

[55] If indeed the Plaintiff had to attend to the air conditioning

problem by calling outside contractors to attend to the problem, there
would have been invoices and receipts of payments made for the
repairs for it was alleged that the air conditioning problem was not
just the 9 th floors but other floors as well affecting a few hundred
rooms!

[56] None of these were produced and the Plaintiff has stopped
claiming for the period after 2010 signifying that whatever problems
were there, they had all been attended so.

[57] As the Defect Liability Period is 18 months from the date of

completion of the whole of the M&E Works, one would have expected
any problems with the Works to be put in writing to the Defendant
and if the Defendant did not attend to it, then the Plaintiff would
proceed to engage third party contractors and deduct the costs from
the 5% retention sum.

[58] At any rate there was no 100% occupancy of those rooms

available to guests if one goes by the Plaintiff’s own summary and
that certainly does not justify a claim against the Defendant for the

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loss of the Room Charges when in any event the Plaintiff’s own
evidence was that even the available rooms were not fully occupied.

[59] This is also not a case where it would be justified to claim for
loss of profits from 1.12.2009 to date of opening on 16.1.2010 for it is
only too obvious that after the completion of the renovation works
there is the need to furnish the rooms and to complete the Interior
Design works and some time to get the staffing, marketing and
promotion done.

Whether the Defendant had proved its Counterclaim on a balance

of probabilities

[60] I am satisfied that the Contract was a provisional sum Contract

for its terms read as follows:

“All Quantities Indicated are provisional only. Tenderers (i.e.

the Defendant) is to determine at site the actual dimensions and
site conditions and price accordingly.”

It was tendered as such by the Claimant in their Tender Documents

that included the Schedule of Tender Price and the Summary of Prices
dated 27.8.2009 and 31.8.2009 respectively and which were
incorporated by the Plaintiff in the Confirmation Letter dated
1.9.2009 that formed the Contract between the parties. See pages 1-15
of Defendant’s Core Bundle.

[61] The meaning of a “provisional sum Contract” has been

explained in Midland Expressway Ltd v. Carillon Construction Ltd
and other [2006] EWCA Civ 936: Vol. 107 Con L.R 235 May L.J said
at page 936 para 1:

“The term provisional sum is generally well understood in the

construction industry. It is used in pricing construction contracts

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to refer either to work which is truly provisional, in the sense

that it may or may not be carried out at all, or to work whose
content is undefined so that the parties decide not to try price it
accurately when they enter into their contract. A provisional
sum is usually included as a round figure guess. It is included
mathematically in the original contract price but the parties do
not expect the initial round figure to be paid without adjustment.
The contract usually provides expressly how it is to be dealt
with. A common clause in substance provides for the provisional
sum to be omitted and an appropriate valuation of the work
actually carried out to be substituted for....but its precise
meaning and effect depends on the terms of the individual
contract.”

[62] As to the mechanics of final price determination it was further

held as follows:

(1) A provisional sum is by definition a sum provided in a

building contract in respect of work which cannot be sufficiently
defined or properly evaluated at the time when the contract is
executed. In practice a provisional sum is generally the best
guess that can be made at the time. It is “provisional” because
neither party is held to that figure, if the actual cost turns out to
be higher or lower.

(2) It is a necessary feature of the provisional sum mechanism

that when the actual value of the work in question is identified
and added to the contract price, the provisionally estimated
value is deducted. If the provisional value is not deducted: (a)
the whole system breaks down; (b) the contractor is paid twice
over and; (c) the provisional sum loses its provisional quality,
the so-called provisional sum becomes a fixed and definite sum

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which the contractor sum is bound to receive in any event (even

if he does nothing to earn it)...”

[63] Thus the provisional sum is a guesstimate and at best an

estimate and the final sum has to be ascertained and accurately
determined based on an assessment and evaluation of work done by
way of measurement where quantities of work is concerned. The M&E
Consultant, JPK & Associates had recommended to the Plaintiff in the
Statement of Final Account dated 11.6.2010 at page 28 of the
Defendant’s Bundle of Documents with the details of the Statement of
Final Account from pages 30-82. The recommended Final Account
Sum was RM9,624,049.54. It was made up of the following:

1.0 Original Contract Sum RM10,013,525.20

2.0 Revised Contract Sum RM 8,744,286.70

3.0 Net Variation Order No.1-3 RM 879,762.84

RM 9,624.049.54

[64] It is too late in the day for the Plaintiff to assert that the
Variation Orders were not authorized. The M&E Consultant is deemed
to be the Plaintiff’s agent at the site where the M&E Works are
concerned. As provided for in Clause 6d) of the Confirmation Letter
the M&E Consultant shall approve all other works relating to M&E
scope of works. The justification for the variation works are as set out
at pages 32-33 and in particular pages 34-36 of the Defendant’s Core
Bundle of Documents. As can be seen the M&E Consultant did not
approve the sum as claimed by the Defendant but did its own
verification and recommended for a reduced amount from
RM10,013,525.20 to a revised reduced sum of RM8,744,286.70 and
the VOs claimed of RM1,002,569.45 to RM879,762.84.

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[65] However still no payment was made and so there was another
meeting held involving the Plaintiff, Defendant and the M&E
Consultant where it was agreed that the M&E Consultant would come
up with a revised payment certificate assessing the value of the
Defendant’s work with the omission of the sum verified by the
Consultant with respect to the air-conditioning system. The Defendant
acceded to it so that payment long outstanding may be effected to
them.

[66] The M&E Consultant came up with Progress Payment Interim

Certificate No.3 or PPIC/3 dated 27.8.2019 made in favour of the
Defendant and addressed to the Plaintiff for the sum of
RM6,320,860.81 at page 83-85 of the Defendant’s Core Bundle of
Documents.

[67] Again there was no payment forthcoming and so the Architect

PW 4 Kevin Woo Thin Fook had a meeting with the Defendant on
1.10.2010 at the request of the Plaintiff to resolve the impasse. In the
letter dated 4.10.2010 from the Architect, KW Associate Architect
Sdn Bhd to the Plaintiff and copied to the Defendant, it was recorded
that they had informed the Defendant that Level 9 was ready to be
handed over for the purpose of testing and commissioning of the air-
conditioning system. It was also recorded that at the meeting held on
1.10.2010 the Defendant had pleaded that the latest certification of
payment by JPK & Associates be released and remitted in good faith
for work done to-date then.

[68] What is of critical importance is what was recorded at paragraph

3.0 of the said letter at page 87 of the Defendant’s Core Bundle of
Documents as follows:

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“Value of Work Done - Independent Audit.

(1) CSSB purposed (sic) a meeting be held with the

independent auditor to peruse the element breakdown and
details of the M&E, in order to derive at a fair and
equitable contract sum (revised, if any).

(2) In the absence of an agreement, an independent Quantity

Surveyor will be nominated by the Architect (as an
independent and disinterested party) and appointed to
carry out an independent audit of the value of work done
to-date.

(3) The fee of such appointment shall be agreed by both

parties and it is, both mandatory and essential that the
parties agree to abide by the decision of the
independent QS be final and binding in the interest of
finality of the issues at hand.

(4) KWAA to propose names of Independent Quantity

Surveyor within the next 7 days.” (emphasis added)

[69] There is no suggestion by either the Plaintiff or the Defendant

that the above does not accurately record the agreement of the parties.
Though there was some initial dissatisfaction arising chiefly out of
further delay to payment, I am quite satisfied that the Defendant did
not protest to this mode of resolving the dispute of the rates and the
quantities of the M&E works were concerned and finally went along
with it, albeit reluctantly and not so cooperatively and participatively
at times.

[70] This can be seen in the Architect’s letter to the Plaintiff dated
9.3.2012 on the failure expressed by the Architect PW 4 to get the
Defendant to agree to a settlement to obviate the need for the

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appointment of an independent Quantity Surveyor. This letter was

copied to the Defendant.

[71] Finally the Plaintiff responded to one of the 2 names proposed

by the Architect as the Independent Quantity Surveyor in KW Hinds
Bluncian Sdn Bhd (“KWHB”). The Architect duly informed the
Defendant by their letter of 9.9.2011 at page 807 Tab S of the
Plaintiff’s Bundle of Documents.

[72] I appreciate that the Defendant had initially contended that the
Contract was a Lump Sum Contract as the Plaintiff had asked for a
negotiated price of less 3% for all quotes items. Even assuming for a
moment that it might have been a Lump Sum Contract, the conduct of
the Defendant in agreeing to the M&E Consultant evaluating and
assessing the value of work done and now agreeing to an independent
Quantity Surveyor to evaluate and assess the M&E Works done would
supersede all previous contractual agreements where the rates and
quantities are concerned with respect to the actual work done plus
Variation Orders.

[73] I have scrutinized the “Final Account Analysis Report on the

M&E Works Done” prepared by KWHB at pages 90-115 of the
Defendant’s Core Bundle of Documents. I must say it is very detailed
setting out each measurement and the rates used and the justification
for using the rates.

[74] PW 1, Mr Tan Wee Lee, the Manager or more effectively the

CEO of the Plaintiff, testified in A 30.1(page 27 NOE) the following:

“The actual value if works by the Defendant is only about

RM7,091,774.80 and we have paid them RM4,857,863.00
leaving a balance of about RM2,233,911.80.

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[75] The Report of KWHB states categorically and clearly the value
of the M&E Works done to be RM7,091,744.80 and after deducting
the amount paid of RM4,857,863.00 there is a balance sum of
RM2,233,881.80.

[76] Both parties are bound by this valuation done by KWHB as

agreed by both of them before the valuation was conducted. They are
both estopped from denying the same and having examined the Report
of KWHB I have no good reason to reject it, based as it is on
reasonable valuation of acceptable and accepted rates in the market.

Pronouncement

[77] For the reasons given above I had dismissed the Plaintiff’s claim
for loss of Room Charges as claimed in the Amended Statement of
Claim and allowed the Defendant’s Counterclaim of RM2,233,911.80.
The above shall carry interest at the rate of 5% per annum from date
of filing of Counterclaim i.e. from 14.6.2011 to date of realization.

[78] After hearing parties on costs the Court allowed costs of

RM120,000.00 to be paid by Plaintiff to Defendant.

Dated: 15 SEPTEMBER 2017

(LEE SWEE SENG)

Judge
Construction Court
Kuala Lumpur

COUNSEL:

For the plaintiff - Jacob Goldie; M/s Jacob Goldie SS Chew

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For the defendant - Rings Low & Ting Lee Ping; M/s Ringo Low &
Associates

Date of decision: 28 APRIL 2017

Case(s) referred to:

Selva Kumar A/L Murugiah v. Thiagarajah A/L Retnasamy [1995] 1

MLJ 817

Johor Coastal Development Sdn Bhd v. Constrajaya Sdn Bhd [2009] 4

MLJ 445

Shirlaw v. Southern Foundries (1926) Ltd [1939] 2 KB 206

Luxor (Eastbourne) Limited and Others v. Cooper [1941] AC 108

BP Refinery (Westernport) Ptd Ltd v. Shire of Hastings Council

[1977] 16 ALR 363

Yap Nyo Nyok v. Bath Pharmacy Sdn Bhd [1993] 2 MLJ 250

Sababumi (Sandakan) Sdn Bhd v. Datuk Yap Pak Leong [1998] 3 MLJ
151

Popular Industries Limited v. Eastern Garment Manufacturing Sdn

Bhd [1989] 3 MLJ 360

Mackt Logistics (M) Sdn Bhd v. Malaysian Airline System Bhd [2014]
2 MLJ 518

Sony Electronics (M) Sdn Bhd v. Direct Interest Sdn Bhd [2007] 2
MLJ 229

Lay Hong Food Corporation Sdn Bhd v. Tiong Nam Logistics

Solutions Sdn Bhd [2017] 1 LNS 708

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Midland Expressway Ltd v. Carillon Construction Ltd and other

[2006] EWCA Civ 936: Vol. 107 Con L.R 235

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